August Housing Starts Down, Permits Up

Housing starts fell by 0.8 percent in August from upwardly revised July numbers, but improved from a year ago as permits jumped by nearly 8 percent.

HUD and the Census Bureau reported privately owned housing starts in August fell to a seasonally adjusted annual rate of 1.18 million, down by 0.8 percent below the revised July estimate of 1.19 million (from 1.16 million) but up by 1.4 percent from a year ago (1.164 million). Single-family housing starts in August rose to 851,000; 1.6 percent higher than July’s 838,000. The August rate for units in buildings with five units or more fell to 323,000, down by nearly 6 percent from July (343,000).

Regionally, starts fell in the South by nearly 8 percent in August to 563,000 units, seasonally adjusted, from 611,000 units in July but improved by 0.2 percent from a year ago. Starts also fell in the Northeast, down by 8.7 percent to 105,000 units in August from 115,000 in July and fell by 21.1 percent from a year ago. Starts edged up in the West, growing to 312,000 units in August, a 4.0 percent increase from 300,000 units in July and a 4.3 percent increase from a year ago. Starts also rose in the Midwest by 22 percent in August to 200,000 units from 164,000 units in July and by nearly 18 percent from a year ago.

The report said privately owned housing units authorized by building permits in August jumped to a seasonally adjusted annual rate of 1.3 million, up by 5.7 percent from July’s revised 1.23 million and 8.3 percent higher than a year ago (1.2 million). Single-family authorizations in August fell by 1.5 percent to 800,000from July’s revised 812,000. Authorizations of units in buildings with five units or more jumped to 464,000 in August, up by nearly 23 percent from July (378,000) and up by more than 10 percent from a year ago.

Privately owned housing completions in August fell by more than 10 percent to 1.075 million from July’s revised 1.197 million but improved by 3.4 percent from a year ago (1.040 million). Single-family housing fell by 13.3 percent in August to 724,000from July’s revised 835,000; the August rate for units in buildings with five units or more fell by 2 percent to 348,000 from July (355,000) but improved by nearly 21 percent from a year ago (288,000).

Mark Fleming, chief economist with First American Financial Corp., Irvine, Calif., said despite the drop in housing starts, the report sent a “positive message” for the housing market.

“Permits and starts increased 8.3 percent and 1.4 percent respectively, compared to a year ago,” Fleming said The increased pace of permits, a leading indicator of starts, is promising for further increases in starts in the coming year. The pace of single-family housing starts, 851,000 (SAAR), a 1.6 percent rise above the July figure, is particularly important as it represents near-term new supply that the housing market is lacking.”

Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C., said data for August housing starts were likely only minimally impacted by Hurricane Harvey. “The storm hit in the last week of August and may have cut into starts in Houston, which has long been the number one market for single-family starts and also one of the top markets for apartment construction,” he said.

Vitner noted single-family starts averaged an 849,000-unit annual rate over the past three months, which is close to the pace averaged this year. “We suspect single-family starts are set to slow, however,” he said. “Permits for new single-family homes have been running at just an 808,000-unit pace for the past three months, or 4.8 percent below single-family starts. Hurricanes Harvey and Irma will also likely slow starts in coming months, as resources are redirected toward repairs and rebuilding efforts. Texas and Florida combined account for about 25 percent of the nation’s single-family starts, so any production lost there is likely to weigh heavily on the national data.”

Fleming said despite August’s improvement, total housing starts are now 70,000 units below the recent peak of almost 1.3 million units in February of this year. “The lack of home building is a major reason why the market has been strained by a lack of inventory,” he said. “Home builders continue to complain they cannot find skilled labor, especially framers, and that buildable lots remain in short supply.”