Housing starts slow to 1.14M rate in August, reflecting recovery pains

Dive Brief:

Housing starts fell 5.8% in August to a seasonally adjusted annual rate of 1.142 million starts from July’s (slightly) upward-revised mark of 1.212 million starts, the Commerce Department reported Tuesday. August’s housing starts came in 0.9% above the August 2015 figure.
Building permit authorizations — a key indicator of future construction activity — were down 0.4% from July and down 2.3% from August 2015.
Of the overall August figure, the single-family category recorded 722,000 starts, down 1.2% from August 2015, while the multifamily sector (buildings with five or more units) posted 403,000 starts, up 2.3% for the same period.

Housing starts data 2016 August graph — U.S. Commerce Department

Dive Insight:

Following a strong July report, August’s housing starts figure fell short of analyst expectations, which called for an annualized pace of 1.18 million new starts. Economists polled by MarketWatch indicated that while demand for housing is on the rise, the economy should have expected stronger building activity by now.

Among the factors stalling that growth and keeping inventory low is limited land availability, a shortage of skilled labor and contentious new regulations. And the resulting bearishness among builders to invest in the potential for new construction activity is causing housing prices to climb, delaying renters from buying houses and keeping current homeowners from trading up to larger properties.

There is hope for improvement, however. The weak housing starts figure comes a day after an exceptionally strong report on builder confidence from the National Association of Home Builders/Wells Fargo Housing Market Index. The NAHB index jumped six points in September to a mark of 65, its highest level in nearly a year, thanks to tight inventory and strong demand driving the need for new housing.

Today’s report will be followed by the American Institute of Architect’s Architecture Billings Index on Sept. 21, and the National Association of Realtors’ existing home sales on Sept. 22.

For all of the latest construction industry data, check out our Industry Pulse page here.