U.S. housing starts rise in August on sharp rise in multi-family construction, building permits fall

Housing starts in the U.S. rose in the month of August from July’s prints. Sequentially housing starts rose 9.2 percent to 1.28 million from July’s downwardly revised reading of 1.17 million. Multi-family construction mainly drove the headline figure, rising sharply by 29.3 percent to 406k units. Single-family starts rose 1.9 percent to 876k units.

Meanwhile, building permits dropped to 1.23 million in August from July’s 1.30 million. Permits dropped in the month for both single and multi-family houses. Region wise, starts rose 19 percent in the West, while it rose 6.5 percent in the South. However, it fell 14 percent in the Northeast region and 10.4 percent in the Midwest.

Over the past several years, housing construction has been one of the slower moving elements of the U.S. economy, restricted by both demand and supply constraints, noted TD Economics in a research report. On the supply side, a lack of available lots, scarcity of workers and increasing input costs are headwinds. On the demand side, tighter credit conditions are heavy debt loads, in particular among graduates, have been a drag on demand.

Starts are expected to get a temporary fillip in the coming months because of rebuilding from Hurricane Florence. Beyond that, housing construction is expected to see a continued upward movement driven by single-family homes, stated TD Economics.

“Multi-family on the other hand is likely to move sideways if modestly lower over the next several years. We estimate underlying annual trend housing starts at above 1.4 million, more than 10% higher than current levels”, added TD Economics.

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