The Census Bureau and the U.S. Department of Housing and Urban Development said that housing starts rose 2.3 percent in August. New residential construction increased from a revised 733,000 annualized units in July to 750,000 in August. This continues slow-but-steady gains in the housing market. In August 2011, for instance, housing starts were just 581,000, suggesting a gain of 152,000 over the course of the past year.

The increase in August can be attributed to higher single-family home building activity, up from 507,000 to 535,000. Multi-family unit construction was down from 226,000 to 215,000. In each case, the levels in August have returned to where they were in June. Whereas single-family unit construction has been on an mostly upward path so far in 2012 (with some weakness in February, March, and July), the multi-family construction levels have been more choppy, with starts ranging from 193,000 in May to 248,000 in February.

On the housing permits front, permit issuance decreased from 811,000 in July to 803,000 in August. This is a decline of 1 percent. The key takeaway here is that housing permits remain above the 800,000 unit threshold, which is where I expect housing starts to be by year’s end. The decline in August was in multi-family units, down from 300,000 to 291,000. Single-family housing permits were up marginally from 511,000 to 512,000. As with starts, permitting has risen significantly year-over-year, with housing permits of 645,000 in August 2011 – an increase of 166,000 in the past 12 months.

Housing completions were also higher, up from 684,000 in July to 689,000 in August. Completions were up 11.7 percent over the past year.

These more upbeat sentiments were also seen in yesterday’s survey from the National Association of Home Builders (NAHB) and Wells Fargo. Their Housing Market Index rose from 37 in August to 40 in September, its highest point since June 2006. The index was just 14 one year ago in September 2011, suggesting a tremendous increase in builder confidence over the past several months. To keep it all in perspective, though, it is an important reminder to note that the housing market remains sub-par, even with recent gains.

Increased building activity was observed in all regions of the country, and the outlook for future construction looks positive. The index for single-family sales over the next six months rose from 43 in August to 51 in September. It had been 29 in January. The traffic of potential buyers has also risen.

Chad Moutray is chief economist, National Association of Manufacturers.

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