WASHINGTON – Households in the United States rose in October, amid returns to multi-family housing projects, but the construction of one-family homes fell by a second month, suggesting that the housing market is stuck in weakness, while mortgage rates march higher.
Development and building continue on a major housing project from over 600 homes in Ocean City, California, United States, on June 25, 2018. RETURES / Mike Blake
Other details from a report released by the Commerce Department on Tuesday were also soft. Construction permits dropped last month, and homes for upgrading were at least a year. Housing began with an increase of 1.5 percent at a seasonally adjusted annual rate of 1,228 million units last month.
Data for September were revised to show that it began to fall to a rate of 1.210 million units instead of the previously reported pace of 1.201 million units.
Building permits fell by 0.6 percent to 1,263 million units in October. Economists surveyed by Reuters predicted that housing began to rise at a pace of 1.225 million units last month.
The housing market makes it difficult to increase borrowing costs, as well as the lack of land and labor, which has led to tight stocks and higher house prices. This makes home buying unavailable for many workers, as wage growth is lagging behind.
The fixed-rate mortgage rate of 30 years ranged to a seven-year high of 4.94 percent, according to data from mortgage finance agency Freddie Mac. Salaries rose 3.1 percent in October from a year ago, following inflation of around 5.5 percent.
Private investment declined in the first nine months of the year and housing is likely to remain subdued for economic growth in the fourth quarter. Economists expect housing activity to remain weak through the first half of 2019.
US financial markets were slightly moved from housing homes on Tuesday.
The only family homebuilding, which accounts for the bulk of the housing market, fell 1.8 percent to a rate of 865,000 units in October, following a drop in September.
Single family housing has lost momentum after reaching a peak of 948,000 units last November, which was the strongest for more than 10 years.
A survey Monday showed that confidence in one-family households fell to its lowest level in November, and builders report that "customers are taking a break because of concerns about rising interest rates and home prices."
One family starts in the south, the largest proportion of homes, fell 4.0 percent last month. A homebuilding family jumped 14.8 percent in the Northeast and fell 2.0 percent in the West. The turnover of single-family homes dropped 1.6 percent in the Midwest.
Permits for the construction of one family fell by 0.6 percent in October to 849,000 units. These permissions remain below the level of one family starts, indicating a limited space for a strong pickup in homebuilding.
It begins for a volatile multi-family residential segment with 10.3 percent, with a rate of 363,000 units in October. Permits for the construction of multi-family homes fell by 0.5 percent at a pace of 414,000 units.
Tuesday's data also suggested that the housing offer is likely to remain tight in the near future. Completion of housing housing in October fell by 3.3 percent to a rate of 1,111 million units, the lowest since September 2017.
Realtors estimate that starting the apartments and completion rates should range from 1.5 million to 1.6 million units a month to join the inventory gap.
The number of apartments under construction increased by 0.5 percent to more than 11-year levels of 1,137 million units last month. But the multi-family segment dominated just over half of the housing inventory that was built last month.
Notification by Lucia Mutiani; Editing by Andrea Ricci