U.S. homebuilding stumbles as supply constraints mount

WASHINGTON, Oct 19 (Reuters) – U.S. homebuilding unexpectedly fell in September and permits dropped to a one-year low amid acute shortages of raw materials and labor, supporting expectations that economic growth slowed sharply in the third quarter.

The report from the Commerce Department on Tuesday also showed the gap between completed houses and those still under construction was the largest on record last month. Robust demand as global economies emerge from the COVID-19 pandemic is running against worker shortages, straining supply chains and fanning inflation. Nearly every industry in the United States is experiencing shortages.

“Momentum in demand still appears to be positive,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics in White Plains, New York. “But supply is struggling to catch up given higher input costs and shortages that remain headwinds for builders.”

Housing starts dropped 1.6% to a seasonally adjusted annual rate of 1.555 million units last month, the lowest level since April. Data for August was revised down to a rate of 1.580 million units from the previously reported 1.615 million units.

Economists polled by Reuters had forecast starts would rise to a rate of 1.620 million units. Lumber prices are rising again after tumbling from record highs set in May. Building materials, like windows and electric breaker boxes, are in short supply.

Prices for copper, another essential material in home building, have soared more than 16% since the end of September, buoyed by decades-low supplies. The pandemic has upended labor market dynamics, leading to shortages of workers needed to produce and move raw materials and finished goods to markets.

Starts have declined from the 1.725 million unit-pace level scaled in March, which was more than a 14-1/2-year high.

Single-family starts, which account for the largest share of the housing market, were unchanged at a rate of 1.080 million units last month. Single-family homebuilding rose in the West and Midwest, but fell in the Northeast and the densely populated South, also likely depressed by Hurricane Ida, which caused unprecedented flooding. Starts for buildings with five units or more dropped 5.1% to a rate of 467,000 units last month.

A survey from the National Association of Home Builders on Monday showed confidence among single-family homebuilders rising further in October, but noted that “builders continue to grapple with ongoing supply chain disruptions and labor shortages that are delaying completion times.”

Stocks on Wall Street were trading higher as upbeat results from Johnson & Johnson (JNJ.N) and Travelers (TRV.N) fired up risk…