Housing starts tumble in August
Despite a lack of existing inventory on the market, housing starts retreated in August as mortgage rates hovered around 7% or better while hindering both home builders and potential buyers.
Combined August starts dropped 11.3% to a seasonally adjusted annual rate of 1.283 million compared to the revised July estimate of 1.447 million, according to the latest Monthly New Residential Construction Report released this morning by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.
The latest figure is also 14.8% below the August 2022 rate of 1.505 million.
Single‐family housing starts in August fell to a rate of 941,000, down 4.3% from the prior month. The rate for units in buildings with five units or more was 334,000, dropping more than 26% from the July rate and plummeting 41% from the August 2022 rate of 566,000.
“High mortgage rates above 7% combined with low resale inventory and higher home prices are slowing housing production, as many first-time home buyers and younger households are struggling to purchase an affordable home,” said Alicia Huey, chairman of the National Association of Home Builders (NAHB) and a custom home builder and developer from Birmingham, Ala. “With high mortgage rates sending buyers to the sidelines, and a nationwide shortage of 1.5 million units, we need to increase the housing supply to get this market back into balance to meet the pent-up demand for when market conditions improve.”
Housing permits demonstrated growth in August, however.
Overall residential building permits increased by 6.9% to a seasonally adjusted annual rate of 1.543 million in comparison to the revised July rate of 1.443 million. The latest report is 2.7% is below the August 2022 rate of 1.586 million.
Permits for single-family homes moved ahead 2% to 949,000 from the July rate of 930,000.
Multifamily permits also showed gains with authorizations of units in buildings with five units or more growing 14.8% to a rate of 535,000 in August compared to a rate of 466,000 in July.
The latest residential construction report follows the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released yesterday. The September HMI, measuring builder confidence, declined 5 points to 45 after growing for five straight months.
“Despite higher demand for new construction stemming from a lack of resale inventory, home builders are feeling pessimistic about the housing market because of elevated mortgage rates hovering above 7%,” said Danushka Nanayakkara-Skillington, NAHB’s assistant vice president for forecasting and analysis. “Unfortunately, we expect mortgage rates to remain at higher levels as the Federal Reserve is likely to increase rates one more time later this quarter.”
Here’s how August starts and permits performed regionally on a month-over-month basis:
- In the Northeast, total starts moved ahead just 1% for the month as single-family starts fell by 1.8%. Permits increased 9.3% with single-family permits rising by 5.9%.
- In the Midwest, combined starts are down 7.5% as single-family starts saw a 12.3% decrease. Permits jumped by 14.3% with single-family permits seeing 2.6% growth.
- In the South, overall starts stepped back by 4.9% but single-family starts increased 8.1%. Permits rose by 3.9% with single-family permits seeing a 1.8% increase.
- In the West, starts dropped by nearly 29% as single-family starts toppled by 26.9%. Permits climbed 9.4% while single-family permits edged ahead by 1.5%.
