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WASHINGTON—Home building in the U.S. fell for a third straight month, showing that rising labor and material costs continue to dent the pace of home construction.

Housing starts, a measure of new-home construction, fell 4% in July from the prior month to a seasonally adjusted annual rate of 1.191 million, the Commerce Department said Friday.

Residential building permits, which can signal how much construction is in the pipeline, rose 8.4% from June to an annual pace of 1.336 million.

Economists surveyed by The Wall Street Journal had expected a 1.0% drop in housing starts and a 4.1% increase for permits last month.

Housing-starts data are volatile from month to month and can be subject to large revisions. July’s 4% decline for starts came with a margin of error of 8.0 percentage points.

Starts were up 0.6% from July last year and building permits were up 1.5% from July 2018.

The Northeast saw the sharpest dip in housing starts with a decline of 13.8% from June. Building permits were also down 3.3% from the previous month in the region.

Despite historically low mortgage rates and rising wages, the housing sector has been strained by a low inventory of affordable homes propelled by rising construction costs and lack of land.

Average rates for 30-year mortgages are at their lowest level in nearly three years, Freddie Mac said Thursday. The National Association of Home Builders also reported Thursday that builder confidence in the market for new single-family homes rose in August and said demand for homes, particularly at lower price points, is strong.

Home builders have struggled to keep up with demand, as the tight job market has created labor shortages, raised labor costs and prolonged construction. Tariffs on Canadian lumber and certain Chinese materials, like quartz and granite, have also made building materials more expensive.

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Article From: "Likhitha Butchireddygari and Harriet Torry"   Read full article