WASHINGTON, July 20 (Xinhua) -- New construction of U.S. homes dropped in June to the lowest level since September, underscoring worries that the United States is on a slow path downward.
The slide occurred after new homes construction took a nosedive the previous month, pushed by a drop in demand.
Residential housing starts decreased 2 percent last month to a 1.56 million annualized rate, after a pace of 1.59 million in May, according to data published Tuesday by the U.S. Census Bureau.
Total existing home sales dropped 5.4 percent to a 5.12 million-unit pace in June, according to a monthly report from the National Association of Realtors released Wednesday.
June marks the fifth consecutive monthly decline for resales, which fell 14.2 percent over the past year, the report showed.
This comes amid a steep rise in mortgage rates caused by aggressive actions by the U.S. Federal Reserve, in its efforts to get record inflation under control.
Indeed, U.S. consumer prices skyrocketed a whopping 9.1 percent last month, the fastest annual clip since November 1981, as inflation keeps rising, according to the U.S. Bureau of Labor Statistics.
In a bid to tamp down inflation, the Fed last month hiked rates by 75 basis points, the biggest increase since 1994. Some economists forecast a recession, while others maintain that inflation has hit its peak and will start to come down, allowing the Fed to ease the pressure with which it slams on the brakes.
"The recent steep decline in homebuilder confidence, coupled with today's disappointing housing start numbers, suggest that the U.S. housing market is in for some rough sledding in the year ahead," Desmond Lachman, senior fellow at the American Enterprise Institute, told Xinhua Tuesday.
"This should come as no surprise given the almost doubling in mortgage rates from 3 percent at the start of the year to their current level of close to 6 percent," Lachman said.
That spike in mortgage rates is the sharpest in the past thirty years and has made homes increasingly unaffordable for most homebuyers. As in previous economic cycles, the housing sector is likely to bear a large part of the brunt of Federal Reserve monetary policy tightening to bring inflation under control, Lachman said.
Brookings Institution Senior Fellow Barry Bosworth told Xinhua that the continued slowing of housing starts is consistent with the expected impact of the monetary tightening on the slowing of economic activity.
The uncertainty is largely outside the construction sector - consumption and equipment investment, Bosworth said.
The news comes as home builders are worried about their immediate future.
Sentiment among U.S. home builders tanked in July to its lowest level since the early months of the COVID-19 lockdowns. Rampant inflation and the highest costs of borrowing in over a decade has had a major impact.
The National Association of Home Builders/Wells Fargo Housing Market Index (NAHB) declined for the seventh month in a row to 55. That's the lowest level since May 2020, and down from June's 67, according to NAHB in a statement on Monday.
When the index is above 50, more builders view the market as positive than negative.
That decline marked the second largest in the history of the index, which goes back to 1985. It was only exceeded by the massive, 42-point dive in April 2020, when most of the country's businesses were under stringent COVID restrictions.
But at the same time, not all economists view the housing sector as faring poorly.
Dean Baker, senior economist at the Center for Economic and Policy Research, told Xinhua the fall in starts was relatively modest and all among single family housing.
"We are still building at a much more rapid pace than before the pandemic," Baker said.
Meanwhile, the median existing-home sales price climbed 13.4 percent from one year ago to 416,000 dollars, a new record high, according to the National Association of Realtors.
"The improvement in supply and cool-down in demand is leading to some moderation in home price gains," economists at the Wells Fargo Securities said in an analysis Wednesday.
The median existing single-family home price rose to a new high of 423,300 dollars in June. "The gain translates to a 13.3 percent year-over-year rise, which is somewhat softer than the 14.6 percent gain registered in May," they noted.
U.S. gas prices are also surging, and that is causing the price of myriad consumer goods to soar, due to transportation costs.
Critics of the Biden administration said much of these high energy costs began when the president cancelled several U.S. oil projects. While the White House blames the conflict in Ukraine, critics note energy began to rise before the conflict.
Meanwhile, President Joe Biden is seeing record lows in his approval rating, which now stands at 37.1 percent, according to the Real Clear Politics polling average.
That's the lowest of any president at this point in office since the 1950s - even lower than former President Donald Trump.
Biden's job approval on economy is 32.4 percent, much lower than the approval of his handling of the COVID-19 pandemic, which is 48.3 percent as of Wednesday.
Brookings Institution Senior Fellow Darrell West told Xinhua that the economy is dragging down Biden's popularity and weakening the Democrats' prospects for the November elections.
"People are pessimistic about the current situation and see inflation eroding their standard of living," West said.
"Predictions that inflationary pressures would abate after a few months already have been proved wrong and it may be months before inflation is brought under control," West said.
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