Housing starts rise more than forecast while permits slump
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.
Residential starts rose 9.2% to a 1.28 million annualized rate (the estimate was 1.24 million) after a revised 1.17 million pace in the 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 a 1.23 million rate, the slowest pace since May 2017 (the estimate was 1.31 million) after a 1.3 million pace.
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%, the most in seven years, and multifamily permits falling 4.9% 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.