Nationwide housing starts fell 5.8 percent to a seasonally adjusted annual rate of 1.14 million units in August, according to newly released data from the U.S. Housing and Urban Development and the Commerce Department. Overall permit issuance edged 0.4 percent lower.
“After two months of gains, the housing market gave back a bit in August,” said Ed Brady, chairman of the National Association of Home Builders (NAHB) and a homebuilder and developer from Bloomington, Ill. “However, with builders reporting low inventory levels and rising confidence, we expect more consumers will return to the market in the months ahead.”
“The August reading represents a one-month blip in what has been a long-term, gradual recovery,” said NAHB Chief Economist Robert Dietz. “On a year-over-year basis, single-family starts are up 9 percent while multifamily construction continues to level off at a solid level as that sector seeks to find a balance between supply and demand.”
Both housing sectors posted production declines in August. Single-family housing starts fell 6 percent to a seasonally adjusted annual rate of 722,000 units while multifamily production declined 5.4 percent to 420,000 units.
Combined single- and multifamily starts increased in three of the four regions in August. The Northeast, Midwest and West posted gains of 7.6 percent, 5.6 percent and 1.8 percent, respectively. The South registered a 14.8 percent decline.
Single-family permits rose 3.7 percent in August to a rate of 737,000 while multifamily permits dropped 7.2 percent to 402,000.
Permit issuance increased 5.1 percent in the Northeast, 4.2 percent in the Midwest and 0.7 percent in the West. Meanwhile, the South posted a loss of 3.4 percent.
“Building permits are more precisely measured than housing starts and signal future building,” said Kristin Reynolds, U.S. economist for IHS Global Insight. “Permits edged lower in August, with the single-family category gaining and the multifamily category losing. New home building is being constrained by lack of available skilled labor, despite increases in compensation. The ratio of construction job openings to hires this summer was at its second highest level in the more than 15-year-history of the series.”
“Several factors point to improvement over the next few months,” Reynolds added. “Demand for new homes is strong despite limited supply. New homes went under contract in July at the fastest pace since October 2007, more than 31 percent faster than a year earlier, while the number of new homes for sale declined in three of the prior four months. Homebuilder optimism jumped in September, in fact, homebuilders have not been more optimistic about the housing market since October 2005. Taken together, we expect housing starts to continue to advance during 2016.”