Housing Starts Drop in August
Housing starts slumped in August after reaching the highest level in almost seven years, pointing to an uneven pickup in the U.S. residential real-estate market that will limit its contribution to economic growth.
Beginning home construction fell 14.4%, the most since April 2013, to a 956,000 annualized rate following July’s revised 1.12 million pace that was the strongest since November 2007, the Commerce Department reported.
Last month’s reading was lower than the most pessimistic forecast of any economist surveyed by Bloomberg. Building permits also fell.
Slow wage growth and tight lending standards continue to challenge the homebuilding industry by placing homeownership out of reach for some Americans. Even so, job market progress and low interest rates could pump life into residential real-estate as the economic expansion gains momentum.
“This data seems a little bit weaker, but overall, the trend is still modestly higher,” said Gennadiy Goldberg, U.S. strategist at TD Securities USA. “The data remains choppy, but overall the trend remains higher.”
The Commerce Department’s construction report showed permits for future projects dropped 5.6% to a 998,000 pace in August from a 1.06 million rate the prior month. They were projected to ease to a 1.04 million rate, according to the median forecast of economists surveyed.
The median estimate in a Bloomberg survey of 78 economists called for a 1.04 million pace. Forecasts ranged from 995,000 to 1.12 million after a previously reported 1.09 million in July.
Starts of single-family properties declined 2.4% to a 643,000 rate in August, the Commerce Department said. Construction of multifamily projects such as condominiums and apartments which tends to be volatile slumped 31.7% to an annual rate of 313,000, the fewest since October.
All four regions showed a decrease in groundbreaking last month, led by a 24.7% drop in the West that was the biggest since November 2012.
Today’s figures were at odds with a report yesterday showing builder confidence rose in September to the highest level since 2005. The National Association of Home Builders/Wells Fargo said its sentiment measure climbed to 59 from 55 in August.
Weather dealt a setback to builders at the beginning of the year as snow blanketed construction sites in parts of the country and cold kept some would-be buyers at home.
