U.S. homebuilding rose more than expected in June, but home builders could probably have built more to take advantage of the red hot housing market if it weren’t for land and labor shortages and high lumber prices.
The Commerce Department reported Tuesday that housing starts increased 6.3% last month to a seasonally adjusted annual rate of 1.6 million units. But that was still lower than March’s rate of 1.7 million, which was the highest level in 15 years.
Low interest rates and a migration from cities to spacier suburbs during the health crisis have driven up housing demand. But builders are facing high lumber prices. The rising cost for materials was a factor that drove confidence among single-family home builders down in July to an 11-month low.
Though lumber futures have dropped nearly 70% from a record high in early May, softwood lumber prices increased 125% year-on-year in June.
Some analysts think new home construction and home sales will only manage a modest rebound in the second half of the year amid some headwinds. The suburban housing boom may slow as companies recall workers back to urban offices, and soaring home prices have made affordability an issue. A gauge of future activity, home building permits, fell more than 5% last month.