Starts and Permits fell again in July, with single-family units taking the largest hit. Single-family Starts fell 14% to 850,000 units from June. This points to tighter supply for the foreseeable future, which would be supportive of higher home prices ahead. Permits, the forward-looking indicator for new home inventory, are only at 1.4 million, which is down 4% from the previous month; showing that there are not many new homes in the pipeline. There has also been a greater fallout of permits to starts than normal, meaning that not all these permits are going to turn into new construction.
What’s the bottom line? Softer than expected construction activity could limit much needed supply down the road, especially among single-family homes. This bodes well for appreciation and shows that opportunities remain to build wealth through homeownership.