The numbers: Construction on new homes rose slightly in May, but high lumber prices and labor shortages have stymied builders and could leave many customers frustrated as the busy summer home-buying season gets underway.
Builders started construction on new homes at a 1.57 million annual pace in May, the U.S. Census Bureau said Wednesday.
In other words, that’s how many houses would be started in a year if construction companies did the same amount of work every month as they did in May.
The increase was somewhat of mirage, however. April’s originally reported increase of 1.57 million was trimmed to 1.52 million.
Permits to build new homes, meanwhile, fell 3% last month in another sign of the trouble builders are running into. They slipped to an annual rate of 1.68 million from a revised 1.73 million in April.
Economists polled by Dow Jones and The Wall Street Journal had forecast housing starts to rise at a 1.63 million annual pace, with permits coming in at 1.73 million. The numbers are seasonally adjusted.
Big picture: Demand for new homes is sky high with the economy recovering and mortgage rates still near rock bottom. Housing starts and permits recently hit a 15-year high.
The problem is, construction companies simply can’t build new homes fast enough — or keep the prices within most the range of most buyers.
High costs of raw materials, a shortage of skilled workers and a limited number of vacant lots all pose barriers to new construction.
The result: Home shoppers should expect a limited selection of properties of sale and higher home prices, potentially limiting the number of buyers.
What’s compounded the problem is a paucity of existing homes for sale. Listings have tumbled 13% since they touched a 14-year high last October.
The housing market has been a big contributor to the U.S. economic recovery. It’s likely to continue to play a big role, just not as big as it has in the past year.