Housing Construction Soars in August — on Multi-Family Gains

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • Homebuilding activity, measured by housing permits and starts ROSE SHARPLY in August with both permits and starts recording their largest month-month increases of the year;
  • The seasonally adjusted annual rate of total permits ROSE 7.7 percent or 102,000 to1.42 million, the highest level since May 2007;
  • Permits for new single-family homes rose 4.5 percent or 37,000 to 866,000;
  • The SAAR of all housing starts ROSE 12.3 percent or 149,000 to 1.36 million;
  • Single-family permits ROSE 4,4 percent or 39,000 while multi-family starts INCREASED 110,000 or 32.8 percent to 445,000;
  • The rate of total housing completions ROSE 30,000 or 2.4 percent in August; The SAAR of single-family completions ROSE 3.7 percent or 34,000 while the pace of multi-family completions FELL 4,000 or 1.1 percent;
  • The pace of single-family housing completions for July exceeded the pace of new home sales in July (the most recent month available) by 43 percent compared with 21 percent in June.

Trends:

  • About 61 percent of the total number of August permits were for single-family homes, lower than the 63 percent share from January through July
  • The pace of total housing permits for July was revised down 19,000, increasing the August gain;
  • The rate of single-family permits was up year-year for the first time in 11 months;
  • Total starts ROSE to their highest level since June 2007.

Data Source: Census Bureau and Department of Housing and Urban Development

Image result for homebuilding industry

Homebuilding – led by multi-family activity – improved in August as single-family home construction continued to struggle.

That’s been the story for the last four years as single-family construction – either permits or starts – continue to fall as a percentage of all housing permits and well below levels in the aftermath of the Great Recession.

In 2015, for example, single-family permits were 60.0 percent of all permits, down from 74.1 percent in 2010. While the year-to-date share is up from 2015, it just 62.9 percent.

For housing starts, single-family homes represented 80.5 percent of all starts dipping to 64.4 percent in 2015. The current year-to-date share is a more respectable 69.4 percent but still 11 percentage points below 2010.

At the same time, new home sales continue to struggle with younger buyers trending more to multi-family units which tend to be closer to urban cores.

The Census and Housing and Urban Development data came just one day after the National Association of Home Builders (NAHB) reported its Housing Market Index rose slightly with builders seeing improvement in all three components of the index: current home sales, home sales six months out and buyer traffic.

Indeed, the HMI may have foretold the Census data.

That said, both the sales and construction figures remain well below pre-Recession levels, especially concerning as mortgage rates are at near-record lows.

Younger, potential home-buyers remain saddled with heavy student loan debt burdens affecting their ability to take advantage of the low rates.

Hear Mark Lieberman every Friday at 6:20 am on POTUS Morning Briefing, Sirius-XM 124. You can follow him on Twitter at @foxeconomics.

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