Home >> Daily Dose >> Optimism Reigns Despite Dropoff in Housing Starts
Print This Post Print This Post

Optimism Reigns Despite Dropoff in Housing Starts

Single-family housing starts took a step back in August after several consecutive months of gains, according to the HUD/Census Bureau New Residential Construction report for September 2016 released Tuesday.

In August, single-family housing starts tumbled by 6 percent from July down to an annual rate of approximately 722,000. Even with the decline, however, single-family housing starts ticked up over-the-year in August by approximately 1 percent.

The over-the-month decline in single-family housing starts may not be cause for concern in the industry, however.

“Part of the August decline in single-family starts was weather-related, particularly due to flooding issues in Louisiana,” National Association of Home Builders (NAHB) Chief Economist Robert Dietz said. “The South reported a 13 percent decline in single-family starts on a monthly basis, and production was 14 percent lower than the August 2015 pace. We should see strengthening single-family construction in the South in the months ahead.”

According to Trulia Chief Economist Ralph McLaughlin, the 12-month rolling total for single-family housing starts—a less volatile measure of new construction—increased by 7.5 percent over-the year in August to nearly 1.6 million starts. Even though August was the fifth straight month in which gains shrank from the previous month, the August 12-month rolling total was still the most starts for a 12-month period since May 2007.

“Housing starts slowed considerably in August, but the year-rolling total is still 7.5 percent higher than last year,” McLaughlin said. “Though a welcome relief for homebuyers stymied by low inventory, homebuilders still have a long way to go to meet historical norms. While it’s tempting to compare to August housing starts to pre-recession peaks, homebuilders arguably built too many homes during this period. A better norm is the 50-year average, of which we’re still about 20 percent below. Looking through the monthly volatility, the persistent increase reflects a healthy combination of homebuilder confidence and sustained demand for homes during a time of solid job and income growth.”

Approximately 428,000 single-family housing units were under construction in August, which is 9 percent higher than August 2015 but has remained virtually unchanged since February. Approximately 610,000 multifamily housing units were under construction in August, an increase of 16 percent over-the-year. Currently, 59 percent of all housing units under construction are of the multifamily variety, which is nearly double the pre-bubble average from 2000 to 2003 of slightly higher than 30 percent.

Despite the dropoff from July to August in single-family starts, builders are more confident in single-family construction than they have been since October 2015, according to the NAHB/Wells Fargo Housing Market Index for September 2016.

“NAHB expects additional growth in the single-family market, given tight home inventories and solid builder confidence,” Dietz said.

Increased permit activity (an increase of 4 percent over-the-month and 8 percent over-the-year for single-family starts) combined with higher builder confidence suggests that single-family inventory could increase soon.

“Today's construction data suggests we will continue to see low vacancies in rentals fueling higher rents and a limited supply of homes for sale in the months ahead,” Realtor.com Chief Economist Jonathan Smoke said. “The good news is we are seeing an important shift in permits for single-family homes, which could signal more supply on the horizon.”

Click here to view the compete Census Bureau report.

About Author: Seth Welborn

Seth Welborn is a Harding University graduate with a degree in English and a minor in writing. He is a contributing writer for MReport. An East Texas Native, he has studied abroad in Athens, Greece and works part-time as a photographer.
x

Check Also

Survey: Homeownership Remains Elusive for Baby Boomer Renters

A recent look into housing affordability by NeighborWorks America has found that three in five long-term baby boomer renters feel homeownership remains unattainable.