U.S. housing starts rose 9.2% to 1.28 million in August from a downwardly revised reading (1.17 million) in July. The gain was led by multi-family construction, which surged 29.3% to 406k units. Single-family starts edged up 1.9% to 876k units.
Building permits, on the other hand, pulled back in August to 1.23 million (from 1.30 million in July). Both single and multi-family permits fell in the month.
Regionally, starts were up 19% in the West and 6.5% in the South, but down 14% in the Northeast and 10.4% in the Midwest.
Key Implications
Housing construction has been one of the slower moving elements of the American economy over the last several years, limited by both demand and supply constraints. On the supply side, a lack of available lots, scarcity of workers and rising input costs are headwinds. On the demand side, tighter credit conditions and heavy debt loads, especially among graduates, have weighed on demand. For more in depth discussion of housing dynamics please see our Quarterly Economic Forecast.
Starts are like to get a temporary fillip in the months ahead due to rebuilding from Hurricane Florence. Beyond that, we expect to see continued upward movement in housing construction to be led by single-family homes. Multi-family on the other hand is likely to move sideways if modestly lower over the next several years. We estimate underlying annual trend housing starts at above 1.4 million, more than 10% higher than current levels.
