Single-family housing starts decreased by 4.3% month over month to a seasonally adjusted annual rate of 941,000 in August, according to the U.S. Census Bureau and the Department of Housing and Urban Development.
Privately owned housing starts fell 11.3% below the revised July estimate to 1,283,000. Privately owned starts also decreased by 14.8% on a year-over-year basis compared with August 2022. The August starts rate for units in buildings with five or more units was 334,000.
“New construction is often viewed as a beacon of hope for the housing market, adding desperately-needed inventory that could help buyers facing affordability challenges,” says Kate Wood, home expert at NerdWallet. “But in August, housing starts hit their lowest level since June 2020, when builders were struggling with shutdowns, labor shortages, and supply chain issues.”
Privately owned housing units authorized by building permits increased 6.9% month over month to 1,543,000; the rate is 2.7% below August 2022. Single-family permit authorizations increased 2% month over month to 949,000 in August, while authorizations of units in buildings with five units or more were at a rate of 535,000.
Privately owned completions increased 5.3% month over month and 3.8% on a year-over-year basis to an annualized rate of 1,406,000. Single-family completions decreased 6.6% month over month to a rate of 1,029,000 in August. The August completions rate for buildings with five units or more was 433,000.
“The headlines on today’s starts report don’t tell the full story. While total housing starts fell, the drop was modest on the single-family side and dramatic for multifamily, the latter of which we have warned about for months,” says Zonda chief economist Ali Wolf. “Higher interest rates, inflation, and elevated construction costs have impacted the viability and desirability of many multifamily projects across the country. Single-family starts slipped month over month, but permit data combined with Zonda data tells us construction should remain healthy through the balance of the year.”
Earlier in the week there was another signal of weakness in the market, as the NAHB/Wells Fargo Housing Market Index, showed builder sentiment fell below the break-even measure of 50 for the first time in five months. Builder confidence in the market for newly built single-family homes in September fell five points to 45. The decrease followed a six-point drop in August, a reflection of builder perception of the high mortgage rate environment.
“The two-month decline in builder sentiment coincides with when mortgage rates jumped above 7% and significantly eroded buyer purchasing power,” says NAHB chairman Alicia Huey. “And on the supply-side front, builders continue to grapple with shortages of construction workers, buildable lots, and distribution transformers, which is further adding to housing affordability woes. Insurance cost and availability is also a growing concern for the housing sector.”
