Housing starts climb higher in August, multifamily housing takes lead

Housing starts increased 9.2% in August, according to the latest report from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.

Privately owned housing starts increased in August to a seasonally adjusted annual rate of 1.28 million, up 9.2% from July’s 1.17 million, and is still up from the annual rate of 1.17 million in August 2017. 

Single-family housing starts in August were at a rate of 876,000, up 1.9% from 860,000 in July.

“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,” Realtor.com Chief Economist Danielle Hale said. “It will offer no relief to the inventory-starved home buying market and could exacerbate the trend of renting becoming more affordable than owning.”

The August rate for units in buildings with five or more units increased to a seasonally adjusted rate of 392,000, an increase from 303,000 in July.

Building permits, decreased from August both monthly and annually. The number of homes being built dipped 5.7% from 1.30 million in July to a seasonally adjusted annual rate of 1.23 million in August. This is down 5.5% from 1.30 million in August 2017.

“Residential construction permits are the most reliable indicator we have of the new housing supply pipeline – and right now, that pipeline feels broken,” Zillow Senior Economist Aaron Terrazas said. “Today’s data showing the slowest multifamily pace of permitting in two years, an indication that apartment developers may finally be easing off the gas, will be welcome news for landlords and property managers wary of slowing rent growth.”

Privately owned housing completions increased at seasonally adjusted annual rate of 1.21 million in August, up 2.5% from July’s 1.18 million. Notably, this is 11.2% above 1.17 million in August 2017.

Single-family housing completions increased 11.6% from the 827,000 reported in July to a rate of just 923,000 completions in August.

“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,” First American Chief Economist Mark Fleming said. ”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.”

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