August Housing Starts Jump 12.3%

August housing starts rose by 12.3 percent and by 6.6 percent from a year ago, HUD and the Census Bureau reported yesterday.

The report said privately owned housing starts in August rose to a seasonally adjusted annual rate of 1.364 million, 12.3 percent higher than the revised July estimate of 1.215 million and 6.6 percent higher than a year ago (1.279 million). Single‐family housing starts in August rose by 4.4 percent to 919,000 from the revised July figure of 880,000. The August rate for units in buildings with five units or more rose to 424,000, a 31 percent increase from July (324,000) and nearly 14 percent higher than a year ago.

Three of the four U.S. regions saw improvement in August. In the South, starts rose by nearly 15 percent in August to 711,000 units, seasonally annually adjusted, from 619,000 units in July and improved by 8.1 percent from a year ago. In the Midwest, starts rose by 15.4 percent to 210,000 units in August from 182,000 units in July and improved by 12.3 percent from a year ago. In the Northeast, starts jumped by 30.5 percent to 124,000 units in August from 95,000 units in July and improved by 25.3 percent from a year ago. The West was neutral, unchanged at 319,000 units in August and down by 4.8 percent from a year ago.

“Low mortgage rates and the strong job market convinced home builders to ramp up production in August,” said Joel Kan, Associate Vice President of Economic and Industry Forecasting with the Mortgage Bankers Association. “Housing starts surged to the fastest pace since 2007, as both single-family and multifamily segments saw sizable gains. Even more noteworthy was the fact that single-family starts saw their strongest month since January.”

Kan noted the strength in new residential construction is consistent with results from the Builder Application Survey released this week (https://www.mba.org/2019-press-releases/september/august-new-home-purchase-mortgage-applications-increased-33-percent), which showed similar growth over the past several months. “Permits for new single-family construction increased for the fourth straight month, which is positive sign for prospective homebuyers and the housing market,” he said.

Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C., said higher sales and builder optimism point to further improvement. “New home construction is finally beginning to catch up to the higher pace seen in new home sales,” he said.

Odeta Kushi, deputy chief economist with First American Financial Corp., Santa Ana, Calif., said August’s figures were encouraging, but more is needed to boost the overall outlook for housing supply.

“Further increases in housing construction may be on the way as well,” Kushi said. “Residential construction jobs increased 3.9 percent between August 2018 and August 2019. More people at work in residential construction signals that housing construction is likely to increase in the months ahead, reinforcing reports that builder confidence increased in September, even in the face of cost challenges.”

The report said privately owned housing units authorized by building permits in August rose to a seasonally adjusted annual rate of 1.419 million, 7.7 percent higher than July (1.317 million) and 12 percent higher than a year ago. Single‐family authorizations in August rose to f 866,000; 4.5 percent higher than the revised July figure of 829,000. Authorizations of units in buildings with five units or more rose to 509,000 in August, a nearly 15 percent improvement from July (443,000) and a 27.3 percent improvement from a year ago.

HUD/Census said privately owned housing completions in August rose to a seasonally adjusted annual rate of 1.294 million, 2.4 percent higher than the revised July estimate of 1.264 million and 5.0 percent higher than a year ago. Single‐family housing completions in August rose to 945,000, 3.7 percent higher than the revised July rate of 911,000. The August rate for units in buildings with five units or more fell slightly to 338,000 in August, down by 0.9 percent from July but up by 17.4 percent from a year ago.

Earlier this week, the National Association of Home Builders reported builder confidence in the market for newly built single-family homes rose by one point to 68 in September from an upwardly revised August reading of 67. The NAHB/Wells Fargo Housing Market Index said sentiment levels have held in the mid- to upper 60s since May and September’s reading matches the highest level since last October.

The HMI index gauging current sales conditions increased by two points to 75; the component measuring traffic of prospective buyers held steady at 50. The measure charting sales expectations in the next six months fell one point to 70. Regionally, the Northeast posted a two-point gain to 59, the West also rose by two points to 75 and the South moved one point higher to 70. The Midwest was unchanged at 57.

“Solid household formations and attractive mortgage rates are contributing to a positive builder outlook,” said NAHB Chief Economist Robert Dietz. “However, builders are expressing growing concerns regarding uncertainty stemming from the trade dispute with China. NAHB’s Home Building Geography Index indicates that the slowdown in the manufacturing sector is holding back home construction in some parts of the nation, although there is growth in rural and exurban areas.”