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July housing starts up a slight 0.9 percent as tariffs bite

AP Economics Writer

WASHINGTON (AP) — The number of U.S. housing starts ticked up just 0.9 percent in July, a sign that higher construction costs might be weighing on homebuilders.

The Commerce Department said on Thursday that housing starts last month rose to a seasonally adjusted annual rate of 1.17 million, not nearly enough to reverse the steep 12.9 percent plunge seen in June as rising lumber, land and labor costs appeared to place constraints on new construction. Lumber prices have shot up by about $7,000 per home since the start of 2017, largely because of tariffs imposed by the Trump Administration on Canadian softwood lumber, according to the National Association of Home Builders.

“It looks like U.S. homebuilders are finding it increasingly difficult to get into the groove,” said Jennifer Lee, a senior economist at BMO Capital Markets.

Still, the total number of housing starts has risen by 6.2 percent so far this year. Solid job growth and a dearth of existing homes for sale have increased  the demand for new properties.

Prices are also influencing would-be buyers, who are facing higher mortgage rates this year. The average interest on a 30-year, fixed-rate mortgage was 4.53 percent this week, up from 3.89 percent a year ago, according to the mortgage company Freddie Mac.

Ground breakings became less common last month in the two priciest regional markets: the West and Northeast. But starts increased in the less expensive markets found in the Midwest and South.

These regional differences led Stephen Stanley, chief economist at Amherst Pierpont Securities, to suggest that weather might be a source of the slowdown. The West is coping with wildfires and heat waves, and the Northeast is dealing with severe rainfalls, he said.

The number of building permits being issued, a sign of future construction plans, increased by 1.5 percent in July.

But Robert Dietz, chief economist for the National Association of Home Builders, noted on Twitter that there has been a sharp increase in the number of single-family homes that have been authorized but never started, suggesting projects are being delayed because of higher building-materials costs.

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