Total housing starts posted a gain in August, led by a jump in multifamily production. However, weaker single-family permit data and expected disruption effects from Hurricane Florence will place downward pressure on starts data next month. Total housing starts increased 9.2% in August and are 6.9% higher for 2018 than in 2017 on a year-to-date basis, according to the joint data release from the Census Bureau and HUD.
The pace of single-family starts increased in August, rising 1.9% to a seasonally adjusted annual rate of 876,000. Recent construction trends for single-family match the solid but slightly lower levels of the NAHB/Wells Fargo Housing Market Index, now registering a score of 67. However, builders continue to report concerns about housing affordability, while also noting the benefits of recent declines in lumber prices.
On a year-to-date basis, single-family starts are 6.3% higher as of August relative to the first eight months of 2017. Single-family permits, a useful indicator of future construction activity, were down 6.1% in August but have shown a 6.5% gain thus far in 2018 compared to last year.
As noted last month, there has been an increase in the count of homes for which permits have been authorized but construction has not started. For single-family homes, there are currently 93,000 permitted units that have not begun construction. This is up 19% from August of 2017, when the total was 78,000. This increase is consistent with NAHB survey data indicating a pause in some planned construction activity due to the increase in building material costs during the first part of 2018. There is no comparable gain for multifamily development.
Multifamily starts (2+ unit production) jumped in August to a 406,000 annual rate. Multifamily activity is performing above the NAHB forecast. On a year-to-date basis, multifamily 5+ unit production is 8% higher thus far in 2018.
With respect to housing’s economic impact, 54% of homes under construction in July were multifamily (612,000). The current count of apartments under construction is even from a year ago. There were 519,000 single-family units under construction in August, a 10% increase from this time in 2017, but a small drop from the 520,000 recorded in July. This was the first monthly decline for single-family units under construction since August 2016.
Regionally, single-family starts are up almost 5% in the Northeast, 5% in the South and more than 14% in the West on a year-to-date basis. However, single-family starts are down almost 2% in the Midwest.