Fri. 1:11 p.m.: US home building fell 4 percent in July, slowing housing market

In this June 19 file photo, a worker carries shingles for a roof of a house under construction in a Brandon, Miss., neighborhood. This morning, the Commerce Department reported that U.S. home construction fell 4 percent in July. (AP Photo/Rogelio V. Solis, File)

WASHINGTON (AP) — The pace of U.S. home construction fell a sharp 4 percent in July despite strong demand from would-be buyers, held back by a shortage of skilled labor and affordable land.

The Commerce Department said today that housing starts slipped last month to a seasonally adjusted annual rate of 1.19 million units. So far this year, housing starts have declined 3.1 percent. Though there was a slight 1.3 percent uptick in the construction of single-family homes last month, the gain was offset by a 17.2 percent plunge in the apartment category.

The construction slowdown, which has persisted all year, is thwarting prospective homebuyers. The solid job market and falling mortgage rates have boosted interest among people seeking homes, yet the shortage of available homes and rising prices have dampened sales. The slowdown in construction, which in turn contributes to the scarcity of available housing, may contribute to a weakening of the overall economy.

Robert Frick, corporate economist at the Navy Federal Credit Union said that July’s report showed that low mortgage rates were not enough to pull the U.S. homebuilding market out of its slump. The average rate on a 30-year fixed mortgage is just 3.6 percent, according to Freddie Mac, its lowest level since November 2016.

“A dearth of cheap lots and persistent labor shortages are constraining builders, especially for homes costing less than $300,000, which have the greatest demand,” Frick said.

In July, home construction fell across the Northeast, Midwest and South. It rose 1.3 percent in the West, where home construction has fallen by 12.3 percent this year.

Today’s construction report suggests that homebuilders may begin focusing more on the rental market. Applications for housing permits, an indicator of future construction, rose 8.4 percent, and apartment complexes accounted for most of the increase.