On Monday, the industry learned that builders remained dour about their future prospects after weak summer sales. On Tuesday morning, it saw the manifestation of builders’ cautionary construction in the Census Bureau’s latest preliminary estimates for housing starts. Those data, though, also delivered some good news by showing modest growth in the number of residential permits issued.

The Commerce Department’s Census Bureau estimates that housing starts fell in August by 5.8%, compared to the same month a year ago, to a seasonally adjusted annualized rate of 571,000 units, which represents a three-month low and below what economists were expecting. Single-family starts were also down, albeit somewhat more modestly, by 2.3% to an annualized rate of 417,000 units.

The Midwest’s housing sector was particularly hard hit in August, as housing starts in that region fell by 25.2% from August 2010 to a seasonally adjusted rate of 107,000 units. Contrarily, starts in the South improved marginally, by 1.7% over August 2010 to an annualized rate of 287,000 units. Single-family starts in the South rose by 9%, and improved in the Northeast, by 6.1%.

Year-to-date through August, builders nationally completed 370,100 homes, 15.4% fewer than during the first eight months of 2010. However, completions in the month of August alone actually rose a bit, by 5.8% to 57,700 units.

Building permits in August, another bellwether of builders' sentiment about their businesses, were also up, by 7.8% over August 2010 to an annualized rate of 620,000 units. Single-family permits edged up by 2% to 413,000 units.

In the West, where annualized permits in August rose 16.5% but starts fell by 1.4%, the California Association of Realtors (CAR) on Tuesday may have tempered builder optimism by predicting that home sales and prices in the Golden State are expected to improve "only slightly" in 2012. CAR's Housing Market Forecast foresees home sales increasing only 1% in 2012 to 496,200 units, after essentially two previous flat years. It also predicts that home prices will increase 1.7% to an average of $296,000.

"Discretionary sellers will play a larger role in next year's housing market," says Beth Peerce, CAR's president. She adds that home sales will be driven by the extent that consumer confidence and job creation improve. 

John Caulfield is senior editor for Builder magazine.

Learn more about markets featured in this article: Washington, DC.