U.S. Housing Starts Rise More Than Forecast While Permits Slump

(Bloomberg) -- U.S. new-home construction rose more than forecast to a three-month high in August, while permits unexpectedly saw the biggest drop since February 2017, adding to signs that homebuilding is struggling to stabilize, government figures showed Wednesday.

Highlights of Housing Starts (August)

• Residential starts rose 9.2% to a 1.28m annualized rate (est. 1.24m) after revised 1.17m pace in prior month
• Multifamily home starts jumped 29.3%; single-family added 1.9%
• Permits, a proxy for future construction of all types of homes, slumped 5.7% to 1.23m rate, the slowest pace since May 2017 (est. 1.31m) after 1.3m pace

Key Takeaways

The data show persistent crosswinds for housing. While starts recovered after two straight declines, homebuilding permits signaled weakness in coming months. The decline in authorizations was broad-based with the single-family segment dropping 6.1 percent, the most in seven years, and multifamily permits falling 4.9 percent for a fifth-consecutive decrease.

As a solid job market and lower taxes aid demand, rising property values and higher mortgage rates are hurdles for potential buyers. On the construction front, builders face higher costs, including for workers and for imported steel that’s subject to tariffs.

While housing starts have been slow to break out over the past year, economists expect the industry will keep expanding.

A gauge of homebuilders’ confidence was unchanged in September from the prior month, matching the lowest level in a year, a National Association of Home Builders/Wells Fargo report showed Tuesday.

Other Details

• Single-family home starts rose to a 876,000 rate from 860,000 the prior month
• Groundbreaking on multi-family homes, such as apartment buildings and condominiums, increased to an annual rate of 406,000; data on these projects can be volatile
• Three of four regions posted gains in starts, led by a 19.1 percent increase in the West; South was up 6.5 percent
• Report shows wide margin of error, with a 90 percent chance that the August figure was between a 2.2 percent drop and 20.6 percent gain
• Report released jointly by the Census Bureau and Department of Housing and Urban Development in Washington

--With assistance from Kristy Scheuble.

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

To contact the editors responsible for this story: Scott Lanman at slanman@bloomberg.net, Jeff Kearns

©2018 Bloomberg L.P.