U.S. home starts jump 9% in August on surge from multi-family

Updated Sep 22, 2018

Construction on Apartment Complex

The rate of construction starts on new homes in the U.S. rose 9.2 percent in August thanks to a big increase in the rate for multi-family homes, or apartments. However, the flooding and disruption for Hurricane Florence will likely have a toll on September’s numbers.

The seasonally adjusted annual rate of home starts rose to 1.282 billion in August and is now up 9.4 percent over the August 2017 total, according to data from the Commerce Department. On a year-to-date basis, home starts are 6.9 percent higher than they were at this same time last year, according to the National Association of Home Builders.

Multi-family starts of five units or more surged 27.3 percent during August to a rate of 392,000, and are 37.1 percent above the August 2017 rate.

The rate of single-family home starts increased 1.9 percent to 876,000 and is 0.2 percent below the August 2017 rate. However, year-to-date, single-family starts are up 6.3 percent compared to the first eight months of 2017, according to the NAHB.

Total home permits were down 5.7 percent in August to a rate of 1.229 million, and are down 5.5 percent from August 2017.

As NAHB notes, the number of single-family homes that have been issued permits but have not begun construction is on the rise. The organization reports there are 93,000 permitted units that have not begun construction, a 19-percent increase from this time last year. NAHB says the rise is consistent with its survey data indicating “a pause in some planned construction activity due to the increase in building material costs.”

Builder confidence in the market, measured by the NAHB/Wells Fargo Housing Market Index, is still solid.

The September release of the index rates builder confidence at a 67, unchanged from last month. Any rating above 50 indicates that most builders believe market conditions are good.

“Despite rising affordability concerns, builders continue to report firm demand for housing, especially as millennials and other newcomers enter the market,” NAHB chairman Randy Noel, a custom home builder from LaPlace, Louisiana, said in a statement. “The recent decline in lumber prices from record-high levels earlier this summer is also welcome relief, although builders still need to manage construction costs to keep homes competitively priced.”

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“A growing economy and rising incomes combined with increasing household formations should boost demand for new single-family homes moving forward,” added NAHB chief economist Robert Dietz. “However, housing affordability is becoming a challenge, as builders face overly burdensome regulations and rising material costs exacerbated by an escalating trade skirmish. Interest rates are also forecasted to keep rising.”