Supply Chain Issues Slowing Down New Home Construction

It appears that June’s good news on the new home front was short-lived, as a new report shows that construction of new single-family homes declined in July.

According to a new report from the Department of Housing and Urban Development and the Census Bureau, new single-family construction fell by 4.5% in July from June’s totals.

The decline erases much of the increase seen in June, when single-family construction rose by 6.3% over May. It also ends two straight months of increases in new home construction.

Overall construction of new homes, which includes the multifamily sector, declined 7% in July.

As for why there was a decline in July after two months in row of increases, the National Association of Home Builders said that it all comes down to building costs and supply chain issues.

“The latest starts numbers reflect declining builder sentiment as they continue to grapple with high building material prices, production bottlenecks and labor shortages,” NAHB Chairman Chuck Fowke said. “Policymakers need to prioritize the U.S. supply chain for items like building materials to ensure builders can add additional inventory the housing market desperately needs.”

There was also a decline in single-family construction permits in July, which the NAHB also chalks up to costs.

“The decline in single-family permits indicates that builders are slowing construction activity as costs rise,” said Danushka Nanayakkara-Skillington, NAHB assistant vice president for forecasting and analysis. “Starts began the year on a strong footing but in recent months some projects have been forced to pause due to both the availability and costs of materials.”

Despite July’s decline, it should be noted that on a year-to-date basis, home construction is up across the board from 2020.

According to NAHB analysis, combined single-family and multifamily starts are 27.7% higher in the Northeast, 20.8% higher in the Midwest, 18.5% higher in the South, and 27.7% higher in the West through the first seven months of 2021 compared to the same time period last year.