US housing starts drop sharply; building permits rise modestly

[WASHINGTON] US homebuilding fell more than expected in April, likely pulled down by soaring prices for lumber and other materials, but construction remains supported by an acute shortage of previously owned homes on the market.

Housing starts tumbled 9.5 per cent to a seasonally adjusted annual rate of 1.569 million units last month, the Commerce Department said on Tuesday. Data for March was revised lower to a rate of 1.733 million units, still the highest level since June 2006, from the previously reported 1.739 million units.

Economists polled by Reuters had forecast starts would fall to a rate of 1.710 million units in April.

Starts surged 67.3 per cent on a year-on-year basis in April.

Groundbreaking activity dropped in the Midwest and the densely populated South, but rose in the Northeast and West.

Demand for bigger and more expensive accommodations amid the Covid-19 pandemic, which has forced millions of Americans to work from home and take classes remotely, has fuelled a housing market boom.

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But the virus has disrupted labour supply at saw mills and ports, leading to shortages of lumber and other raw materials, boosting prices and threatening to sideline first-time homebuyers from the market.

The inventory of previously owned homes is near record lows.

Tariffs on steel imports are also adding to building costs.

Lumber prices surged 89.7 per cent on a year-on-year basis in April, according to the latest producer price data.

REUTERS