The US housing market rebounded more than anticipated in June after declining for three consecutive months, but building activity remains constrained by rising lumber prices and labor and land shortages.
Homebuilders ramped up building in June to the fastest pace in four months, led by surges from the Midwest and the Northeast.
Home construction has climbed 3.9 percent year-to-date, but that increase has been not able to compensate for the reduction in existing homes being listed for sale.
The housing market report showed groundbreaking on homes rebounded to the strongest pace in four months, Commerce Department data showed.
The pickup in construction last month reflected apartment buildings in addition to starts of single-family homes.
Prices for homes have surged at a pace of more than six times wage growth. Builders face higher costs for materials and land, putting a limit on how much construction can occur. This is why I predict that the housing market has topped.
Steady gains in construction are expected during the next year, supported by fundamental demand for housing.
Housing starts jumped a stunning 83.7 percent in the Northeast and 22 percent in the Midwest, growth that's unlikely to continue.
Homebuilders say construction is being limited by shortages of skilled labor and land as low borrowing costs encourage buyers.
Demand for new housing continues to outpace supply. Builders remain confident about the industry's ability to keep on expanding gradually, with the biggest challenges being the absence of both buildable lots and skilled labor.
The National Association of Home Builders/Wells Fargo builder sentiment index fell in July to 64. Readings above 50 indicate more builders view sales conditions as good than poor.
There's just no way the housing market continues uptrending in a rising rates environment with weak wage growth.