August Housing Starts Continue Growing

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The U.S. Census Bureau and the Department of Housing and Urban Development reported Tuesday morning that new housing starts in August fell to a seasonally adjusted annual rate of 1.18 million, a decrease of 0.8% from the upwardly revised June rate of 1.19 million and an increase of 1.4% compared with the August 2016 rate of 1.164 million. The consensus estimate from a survey of economists expected a rate of around 1.173 million.

The revision to the July rate added 35,000 new housing starts from the previously reported total. The seasonally adjusted rate of new building permits rose to 1.3 million, up 5.7% from the upwardly revised July rate of 1.223 million and up 8.3% from the August 2016 rate of 1.2 million. The consensus estimate called for 1.22 million new building permits.

Single-family housing starts also rose in August to an annualized rate of 851,000, up 1.6% from the revised July rate of 838,000. Single-family starts rose by 17.1% year over year in August.

July single-family starts rose by nearly 11% and were up more than 17% year over year in August. Single-family homes have experienced high demand and low inventories for a long time, but as new homes are built, prices increases should moderate and more first-time buyers will be able to get into the market.

Permits for new single-family homes fell in August from a revised annual rate of 812,000 in July to a seasonally adjusted annual rate of 800,000. The rate rose 8.3% year over year.

For the months of June and July, the number of new housing starts were revised upward and the August total, though slightly below July, came in better than expected. New permits also rose in August. Overall this is a solidly encouraging report on the U.S. housing market.

An exception to the overall good news in August is that multifamily starts for buildings with five or more units decreased by 23.1% year over year in August and dropped by 5.8% compared with July. This number is more volatile than the single-family number and has been moving mostly sideways since 2013.