New residential construction ddelined for the second month in a row after reaching a post-recession peak in June, despite the best industry optimism in a decade
New home starts fell 3.0 percent to 1.126 million at an annualized rate in August from a 1.161 million pace in July that was weaker than originally estimated, reported the Commerce Department today. Economists had projected 1.160 million starts.
Permits for future construction remained strong, rising 3.5 percent to a 1.170 million units annually from 1.130 million in July. It was the third highest rate in seven years, indicating that builders plan to maintain the fastest pace of home construction in a decade. Forecasts were for permits to rise to 1.159 million.
Steady job creation and low unemployment may be compensating for stagnant wages, and combined with historically low mortgage rates, permitting more Americans to enter the housing market. First time buyers are largest purchasers of new homes.
The pickup in buyer interest is reflected the National Association of Home Builders Housing Market Index which reached 62 in September, its best level since October 2005. The component indexes for present and future sales, and prospective buyers also saw the best scores in almost ten years. Optimism was highest in the South followed in declining order by the West, Midwest and Northeast.
Groundbreaking on single-family homes fell 3 percent last month to a 739,000 annual rate from July's seven-year high of 762,000.
Permits for single-family houses, the largest and most profitable part of the new construction market, climbed to a 699,000 rate, the highest since January 2008.
Construction on multifamily homes declined 3 percent to an annual rate of 387,000 from 399,000 in July.
The multi-unit sector had soared in the past two years as the slow economic recovery and rising home prices had pushed many people into the rental and condominium market. In June the annual construction rate on multiple dwelling reached 524,000 units, the highest total since 1987.
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Total Housing Starts
Single Family Starts-white; Mulit-Family Starts-yellow