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Housing Starts Up in August

Phil Hall
Sep 19, 2018
Mortgage purchase and refinance activity took a tumble while the gap between appraisers and homeowners on property valuations continued to close a gap

Single-family housing starts were at a rate of 876,000 in August, according to new data from the U.S. Census Bureau and the Department of Housing & Urban Development (HUD). This is 1.9 percent above the revised July figure of 860,000. Privately-owned housing starts in August were at a seasonally adjusted annual rate of 1,282,000, which is 9.2 percent above the revised July estimate of 1,174,000 and is 9.4 percent above the August 2017 rate of 1,172,000.
 
Single-family authorizations in August were at a rate of 820,000, a 6.1 percent drop from the July figure of 873,000. Privately-owned housing units authorized by building permits in August were at a seasonally adjusted annual rate of 1,229,000, a 5.7 percent drop from the revised July rate of 1,303,000 and 5.5 percent below the August 2017 rate of 1,300,000.
 
Single-family housing completions last month were at a rate of 923,000, which is 11.6 percent above the revised July rate of 827,000. Privately-owned housing completions in August were at a seasonally adjusted annual rate of 1,213,000, up 2.5 percent from the revised July estimate of 1,183,000 and 11.2 percent higher than the August 2017 rate of 1,091,000. 
 
Initial reaction to the new data was positive, although some traces of apprehension could be detected.
 
“The robust demand we are seeing in the overall housing market and the shortage of supply of existing homes leads us to believe that new home construction should generally trend upward over the next year,” said Ruben Gonzalez, Chief Economist at Keller Williams. “Material and labor costs have likely eaten into builder margins this year and higher mortgage rates may put some pressure on builders’ ability to raise prices. This all may result in builders moving more cautiously in the second half of year. We still believe demand favors more construction of new homes.”
 
Danielle Hale, Chief Economist for Realtor.com said, “Single family housing starts ticked up slightly for the second month in a row in August but remain below levels seen in the first five months of the year. At the same time, the share of single-family starts took a major step back, falling below 70 percent, as multi-family starts surged 38 percent, the biggest year over year jump in more than three years. Although the jump in starts is good news for the overall economy because multi-family construction will boost GDP and provide jobs and incomes to the builders, the overwhelming majority of multi-family construction is built for rent. It will offer no relief to the inventory-starved home buying market, and could exacerbate the trend of renting becoming more affordable than owning. Without entry-level single-family home construction, Millennials will continue to lag behind other generations in their ownership rate and experience a delay in the wealth building that comes from homeownership.”
 
First American Chief Economist Mark Fleming said, “The growth in housing starts is welcomed news after two consecutive monthly declines. Furthermore, the number of homes under construction has also increased by 4.6 percent compared to a year ago, indicating a new supply of homes in the future. Finally, this month saw an increase of 11.2 percent in the number of completed homes compared to August of last year, which is additional new net supply added to the housing stock. The continued year-over-year growth in completions means more homes on the market in the short-term, offering some immediate relief in alleviating housing supply shortages.”
 
But Fleming noted that the “latest developments with Hurricane Florence may pose a threat to this pace,” an opinion shared by Brent Nyitray, Director of Capital Markets at iServe Residential Lending in Stamford, Conn. “Housing starts will probably take a step back in the next few months as construction workers will be occupied rebuilding North Carolina. Labor remains an issue for new home construction, but the tariff-driven spike in lumber prices is over, and futures are trading at 18-month lows.”

 
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