New home construction activity in the United States fell sharply in July, and the number of permits issued for new construction projects also fell, as rising mortgage rates and supply chain issues continued to cause what lawmakers are calling a national housing crisis.
Seasonally adjusted housing starts fell 9.6% to 1.45 million units in July from nearly 1.6 million in June, down 8.1% from July last year, reported Tuesday the Census Bureau and the Ministry of Housing and Urban Development.
Housing starts missed expectations by 6.1%, according to a Reuters poll of economists, which put the number at 1.54 million units.
Permits for single-family homes fell 4.3% in July from 970,000 in June to 928,000. Building permits overall fell 1.3% to 1.67 million from a June figure of nearly of 1.7 million.
Homebuilder confidence fell for the eighth consecutive month in August, the National Association of Homebuilders (NAHB) reported on Monday, leading the group to declare a “housing recession”.
“The Federal Reserve’s monetary policy tightening and persistently high construction costs have caused a housing slump,” Robert Dietz, chief economist at NAHB, said Monday.
The Federal Reserve’s interest rate hikes began in March, aimed at tackling inflation that has hit 40-year highs following massive private sector shutdowns caused by the pandemic. Bank interest rates are currently between 2.25 and 2.5% and are expected to reach 3.5% by the end of the year.
The standard 30-year fixed-rate mortgage now stands at 5.22%, down from a high of 5.81% in June. The last time mortgage rates exceeded 5% was in 2011.
Lawmakers have sounded the alarm over shortages in the country’s housing supply, which government lender Freddie Mac puts at 3.8 million units, though other studies put the number higher .
“I feel like painting a big ‘supply’ message across maybe one of the avenues here. It’s just supply. Or it’s supply, stupid,” said Sen. Maria Cantwell (D-Wash.) at a Senate Finance Committee meeting on affordable housing in July “It’s really about supply.”