WASHINGTON —U.S. home building fell last month, led by a drop in apartment construction, while developers broke ground on more single family homes.
The construction of new houses and apartments declined 2.6 per cent in January to a seasonally adjusted annual rate of 1.25 million, the Commerce Department said Feb. 16. The drop came after a much larger gain the previous month. Single family housing starts rose 1.9 per cent while apartment building dropped 7.9 per cent.
Even with the decline, new home construction has increased 10.5 per cent in the past year. That gain has been fuelled by rising demand for homes as more Americans are looking to buy.
Yet many potential buyers are frustrated by a lack of available properties. The supply of existing homes fell in December to its lowest level since 1999. That has pushed up prices as buyers have had to bid against each other.
Home builders have responded by ramping up construction, but the increases haven't been fast enough to relieve supply shortages.
Rising prices, a tight supply of homes and higher mortgage rates combined to slow sales of existing homes in December, when they fell 2.8 per cent.
Still, home construction has largely recovered from the housing bust that began a decade ago. In 2016, builders started work on the most new homes since 2007, the year the Great Recession began.
Building permits, a gauge of future construction, rose 4.6 per cent last month, led by a big gain in apartment permits. Single-family permits fell.
Home building increased the most last month in the Northeast, where housing starts soared 55.4 per cent, and the South, with a 20 per cent rise. Developers broke ground on the most new homes in the South in more than nine years.
Higher mortgage rates could exert a bigger drag on sales in the coming months. The average fixed-rate 30-year mortgage was 4.17 per cent recently, down slightly from 4.19 per cent previously.
While that is still low historically, it is far above the average rate of 3.65 per cent for all of 2016.
Rates have been pushed higher because they have followed the yield on the 10-year Treasury note, which has risen because investors have anticipated faster growth and higher inflation since the election.