U.S Housing Starts Plunge in August

New U.S. home construction fell more than projected in August as a plunge in the South more than offset gains in the rest of the country.

Residential starts declined 5.8 percent to a 1.14 million annualized rate, from the prior month’s revised 1.21 million pace, a Commerce Department report showed Tuesday in Washington. The median estimate of economists surveyed by Bloomberg called for a drop to 1.19 million. Permits, a proxy for future construction, unexpectedly slipped on fewer applications for apartment projects.

The figures represent a pause after a spell of strong gains, and permits show that single-family home construction in the South may bounce back. A solid job market and mortgage rates near historically low levels continue to support housing, with a measure of homebuilder sentiment rising this month to an 11-month high.

“Some of the data has been a bit mixed recently, but I don’t think there are major reasons to worry,” David Sloan, senior economist at 4cast Inc. in New York, said before the report. “The overall picture for housing is still reasonably positive.”

The decline of 14.8 percent in housing starts in the South, to a 543,000 annual pace, was the steepest since October. The other three regions — the Northeast, Midwest, and West — all showed pickups.

Possible Rebound

Construction of single-family homes in the South may rebound in coming months, as applications to build such dwellings rose 3.6 percent to a 404,000 annualized pace, the strongest since 2007.

In the Bloomberg survey, projections for housing starts nationwide ranged from 1.1 million to 1.25 million.

Permits decreased 0.4 percent to a 1.14 million annualized rate. They were projected to rise to a 1.17 million rate, according to the survey median.
Construction of single-family houses fell 6 percent to a 722,000 rate from 768,000 the previous month.

Work on multifamily homes, such as townhouses and apartment buildings, dropped 5.4 percent to an annual rate of 420,000. Data on these projects, which have led housing starts in recent years, can be volatile.

A separate report on Monday showed that the National Association of Home Builders/Wells Fargo index of homebuilder sentiment rose to an 11-month high in September. Readings greater than 50 mean more respondents reported market conditions as good. The index of current sales jumped to the highest in more than a decade, while the six-month sales outlook also had the best reading in almost a year.

Prospective buyers continue to face relatively low borrowing costs. Federal Reserve policy makers, who are debating when to raise the benchmark interest rate, begin a two-day meeting on Tuesday in Washington.

Bloomberg

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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell