U.S. Housing Starts Plunge To Three-Year Low But Building Permits Spike
While the Commerce Department released a report on Tuesday showing a much sharper than expected pullback in U.S. housing starts in the month of August, the report also showed a much bigger than expected surge in U.S. building permits.
The report said housing starts plunged by 11.3 percent to an annual rate of 1.283 million in August after jumping by 2.0 percent to a revised rate of 1.447 million in July.
Economists had expected housing starts to decrease to an annual rate of 1.440 million from the 1.452 million originally reported for the previous month.
With the substantial pullback, housing starts tumbled to their lowest level since hitting an annual rate of 1.266 million in June 2020.
Single-family housing starts slumped by 4.3 percent to an annual rate of 941,000, while multi-family housing starts plummeted by 26.3 percent to an annual rate of 342,000.
Meanwhile, the Commerce Department said building permits surged by 6.9 percent to an annual rate of 1.543 million in August after inching up by 0.1 percent to a revised rate of 1.443 million in July.
Building permits, an indicator of future housing demand, were expected to rise to an annual rate of 1.445 million from the 1.442 million originally reported for the previous month.
With the sharp increase, building permits reached their highest level since hitting an annual rate of 1.555 million last October.
While single-family permits jumped by 2.0 percent to an annual rate of 949,000, multi-family permits soared by 15.8 percent to an annual rate of 594,000.
“August’s home construction data appear to be showing some cracks in the armor of what has been one of the few strong indicators in the housing market recently,” said Nationwide Economist Daniel Vielhaber. “Still, it’s important to note that that there could be a noise component here as much of the sharp decline in starts came from the multifamily sector, which is notoriously volatile.”
He added, “However, the decline in builder sentiment – particularly the fall in expected sales in the next six months – could lead to more slow paces in the months to come.”
On Monday, the National Association of Home Builders released a separate report showing homebuilder confidence in the U.S. has unexpectedly deteriorated in the month of September.
The report said the NAHB/Wells Fargo Housing Market Index slumped to 45 in September after tumbling to 50 in August. Economists had expected the index to come in unchanged.
The housing market index dropped below the key breakeven measure of 50 for the first time in five months, as persistently high mortgage rates above 7 percent continue to erode builder confidence.
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