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New Home Starts Drop Nationwide in August

[Post Category: Industry News]

Fewer building permits were issued in the U.S. last month, and housing starts slumped, but underlying data suggests there is modest momentum for single-family home building.

Building permits issued for privately owned housing units fell 0.4% in August from the prior month to a seasonally adjusted annual level of 1.139 million, the Commerce Department said Tuesday. Housing starts last month fell 5.8% from July to an annual rate of 1.142 million. Both readings came in below economists’ forecasts. built

But permits for single-family homes, about 60% of all permits, increased 3.7% last month, the largest gain since June 2014 and suggesting a break between that segment and apartment and condominium building. The August decrease in starts was in part driven by a sharp decline in the South, an area of the country hit with heavy rain and flooding last month.

Through the first eight months of the year, permits were down 0.8% compared with 2015, but single-family permits were up 8.4%, year to date. Single-family starts were up 9.1% through eight months.

Relatively stronger momentum for single-family home construction suggests that builders are responding to rising prices and steady demand for that segment, while construction of larger properties is cooling.

The trend “reflects a healthy combination of home builder confidence and sustained demand for homes during a time of solid job and income growth,” said Ralph McLaughlin, economist at real estate website Trulia. “Though a welcome relief for home buyers stymied by low inventory, home builders still have a long way to go to meet historical norms.”

Housing starts remain well below their 50 year average despite fairly steady growth since 2011. Construction gauges touched record lows during the recession that followed the housing crisis.

Monthly housing data can be choppy and is subject to sometimes large revisions. August’s decline in permits, based on a survey of local governments, had a margin of error of 1.6 percentage points. Last month’s decline in starts, based on a survey of builders and homeowners, came with a margin of error of 9.7 percentage points.

July permits were revised to a 1.144 million rate from 1.152 million. The revised figure remained an 0.8% decline from June. July starts were revised higher by just 1,000, but June starts were revised up more significantly. As a result, starts advanced 1.4% in July, a smaller gain than initially estimated.

Sales of existing homes, about 90% of the housing market, have grown fairly strongly this year, reaching a post-recession peak in June, according to the National Association of Realtors. Steady job growth, wage gains and low interest rates on mortgages have supported home buying. But a limited selection of new or existing homes is causing prices to rise and pushing home purchases out of reach of some would-be buyers.

A National Association of Home Builders survey this week showed builders are growing more confident about the single-family market.

“With the inventory of new and existing homes remaining tight, builders are confident that if they can build more homes they can sell them,” NAHB economist Robert Dietz said Monday.

The Realtors group will release data on existing-home sales during August on Thursday. The Commerce Department’s August report on new-home sales is due out on Sept. 26.

 

 

as appeared on WSJ






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