Housing Starts Declined in August but Single-Family and Permits Remained Encouraging

The Census Bureau and the U.S. Department of Housing and Urban Development said that new housing starts declined 0.8 percent in August. New residential construction edged down from 1,190,000 units at the annual rate in July to 1,180,000 in August. It is possible that there were some negative impacts from Hurricane Harvey in these data, much as seen in the home builder confidence numbers released yesterday. Outside of weather effects, housing starts have been softer than desired year-to-date, drifting lower since peaking at 1,288,000 units in February. With that said, starts have risen 1.4 percent over the past 12 months, up 1.4 percent since August 2016.

Much of the weakness—and month-to-month volatility—in the data have come from the multifamily segment. Indeed, multifamily housing starts were down from 352,000 units in July to 329,000 in August, its slowest pace since November. Moreover, housing permits were 437,000 one year ago, representing a steep decline of 24.7 percent over the past 12 months. (To be fair, these data have large swings from report to report, which impact the year-over-year figures.) In contrast, single-family starts rose from 838,000 to 851,000. While single-family activity in August was lower than in February’s post-recession high of 877,000 units, it has trended higher overall. In fact, single-family starts have jumped 17.1 percent year-over-year, up from 727,000 units in August 2016. As such, these data are perhaps more encouraging than the headline number might suggest.

Along those lines, housing permits increased from an annualized 1,230,000 units in July to 1,300,000 in August. It was the best reading since January, and the good news was the permits have now exceeded 1.2 million units in 11 of the past 12 months. Permits are a proxy of future activity, so these data suggest strong growth moving forward. Nonetheless, the underlying data were mixed in August, with single-family permitting down from 812,000 to 800,000 but multifamily activity up to a 10-month high from 418,000 to 500,000. Overall, new residential construction permits have increased 8.3 percent since August 2016, up from 1,200,000 units last year. Single-family and multifamily residential permits were have risen 7.7 percent and 9.4 percent year-over-year, respectively.

Chad Moutray

Chad Moutray

Chad Moutray is chief economist for the National Association of Manufacturers (NAM) and the Director of the Center for Manufacturing Research for The Manufacturing Institute, where he serves as the NAM’s economic forecaster and spokesperson on economic issues. He frequently comments on current economic conditions for manufacturers through professional presentations and media interviews. He has appeared on Bloomberg, CNBC, C-SPAN, Fox Business and Fox News, among other news outlets.
Chad Moutray

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