Construction on new houses in the United States dropped 4 percent in July to the second-lowest rate this year, but builders applied for more permits in a positive sign for the country’s housing market.
Housing starts fell to an annual rate of 1.191 million in July from a revised 1.241 million in June, according to the monthly report from the U.S. Commerce Department.
Economists polled by MarketWatch had anticipated a 1.25 million rate for starts.
Permits to build additional properties rose 8.4 percent to a seasonally-adjusted annual pace of 1.336 million from June’s revised rate of 1.232 million. For permits, economists polled by MarketWatch expected a rate of 1.29 million.
Multi-dwelling projects of five or more units went down 17.2 percent versus a 1.3 percent rise for single-family homes, which account for most new construction. This was the highest rate of new single-family construction (876,000) since January.
Regionally, new construction fell everywhere except for the Western states, where it was 1.3 percent up.
The decrease in mortgage rates throughout 2019 has yet to spark any sort of major boom for the home-buying market, though at the margins it may be helping ease affordability constraints for some Americans.
Home builders continue to face the same headwinds as they have all year. There are a large number of open construction jobs that need to be filled. Meanwhile, land is more expensive, and the ongoing tariff disputes between the U.S. and other countries (notably, China) have raised the prices of construction materials.
“A significant disappointment in July housing starts should be at least somewhat offset by a nicer reading on building permits, suggesting that there’s better news coming for U.S. housing,” said Avery Shenfeld, chief economist of CIBC Capital Markets.
The Dow Jones Industrial Average and S&P 500 rose slightly in Friday trades.
Shares of home-building companies such as LGI Homes, D.R. Horton, and Meritage Homes all fell on the housing-starts data. One fund that tracks housing stocks fell slightly Friday morning, while another remained even with the previous day.
The 10-year Treasury yield increased to 1.56 percent, capping off a week in which its yield and that of the 2-year Treasury note inverted.