Construction of new homes in the United States fell for the second straight month in June as builders erected fewer apartments in the West and South, according to data released Wednesday.
And the pace looked set to slow even further as permits for new construction of much needed homes took an unexpected tumble to the lowest in just over two years, also led by steep drops in the West and South.
The housing sector is a key segment of the US economy, helping drive consumer spending and serving as one barometer of economic wellbeing.
But while construction was marginally stronger in the second quarter than at the start of the year, it is not keeping pace with demand.
The Commerce Department reported that home construction fell 0.9 percent in June compared to May, dropping to an annual rate of 1.25 million, seasonally adjusted. That fell short of economists' expectations and was more than six percent below June of last year..
Permits for new construction projects fell six percent, to the lowest level since May 2017, and 6.6 percent below the year-ago level.
The weakness for permits was all in the volatile apartments segment, however, which plunged nearly 21 percent in the months and is 13 percent below June 2018.
Officials warn the monthly data are subject to broad margins of error and say six months should elapse before a trend can be established.
Despite low unemployment, rising wages and falling mortgage rates, sentiment among homebuilders in the United States has been tame in recent months. Analysts blame labor shortages and rising costs for materials.
Economists said the housing market was likely to pickup in later in the year to meet pent-up demand.
Amid rising mortgage applications, "we expect home sales to reach new highs in the late summer or early fall, dragging up housing construction in due course," Ian Shepherdson of Pantheon Macroeconomics said in a research note.