U.S. home construction slipped last month as an uptick in the building of single-family homes was offset by a big drop in apartment construction.
The Commerce Department said Wednesday that construction was started at a seasonally adjusted annual rate of 1.25 million in June, down 0.9% from 1.27 million in May. Construction of single-family homes rose 3.5%, but apartment building skidded 9.4%.
Applications for building permits, an indication of future construction, fell 6.1% last month to 1.22 million, the lowest since May 2017.
Falling mortgage rates are expected to spur home construction, overriding other concerns such as shortages of building lots and construction workers. The average rate on a 30-year, fixed-rate home loan last week stood at 3.75%, down from 4.53% a year ago.
“Still, pullback in building permits in June suggests further weakness could be in the pipeline,” Shernette McLeod, economist at TD Economics, said in a research note. “Rising costs, lack of land and labor shortages continue to pose challenges to builders, impeding their ability to fully take advantage lower borrowing rates to construct more in demand entry-level units.”
Home construction overall was up 6.2% last month from June 2018. Single-family construction slid 0.8% and apartment building jumped 25.3% from a year earlier.
Housing starts rose 31.3% from May to June in the Northeast and 27.1% in the Midwest but fell 9.2% in the South and 4.9% in the West.