Highlights:
- August housing starts unexpectedly dropped 2.3% in the month to an annualized 201.0k from 205.8k in July. Market expectations had been a rebound in August starts to 216.3k largely premised on indications of still very robust housing permits data.
- August’s decline was largely split between urban single-detached units dropping 2.6% to 52.2k while the usually more volatile urban multiples dropped a marginally lesser 2.4% 132.7k. Rural starts averaged 16.1k little changed from July’s level.
Our Take:
August housing starts unexpectedly moderated to an annualized 201.0k which was down 2.3% from 205.8k in July. The slowing was in contrast to expectations going into the report for starts to bounce back to around 216k. These expectations were largely premised on building permits remaining very strong averaging 240k over the most recent three-month period ending in July. The strength in permits has been roughly consistent with housing starts averaging 222k over the first half of this year. However, this strength in both permits and starts has been surprising given the restraining effects of rising mortgage rates and tightening mortgage lending standards. These factors have had a noticeable dampening impact on housing resales which are down almost 20% over the first half of this year. Today’s report is indicative of these housing market headwinds starting to temper housing starts. Our expectation is these factors will keep starts close to 200k in the fourth quarter and further lowering the level of activity to 195k in 2019.
