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New construction received a shot of adrenaline in August despite high construction costs and stunted demand, according to data released Tuesday by the U.S. Census Bureau and the Department of Housing and Urban Development.
Housing starts saw a monthly increase, jumping 12.2 percent to a seasonally adjusted rate of 1,575,000 last month, according to Census data. August 2022 levels were 0.1 percent below August 2021 levels. Single family housing starts were at a rate of 935,000, 3.4 percent above their July figures.
New permits, which offer a preview of where new housing construction is headed, hovered at a seasonally adjusted rate of 1,517,000 in August, 10 percent below the July 2022 rate of 1,685,000 and 14.4 percent below the August 2021 rate of 1,772,000, according to data from the Census Bureau. The dropoff in permits represents a response by builders to decreasing demand in the face of high mortgage rates.
“The decline in permits shows that builders are responding to the decline in affordability and cooling demand in the purchase market by building fewer single-family homes,” First American deputy chief economist Odeta Kushi said in a statement.
Housing completions dropped 5.4 percent to a seasonally adjusted rate of 1,342,000, but were 3.1 percent above August 2021 levels, according to Census data.
The construction of multifamily buildings continued to be a bright spot, with multifamily construction up 31 percent from a year ago, data showed.
“The strong multifamily sector will help renters who should expect to see cooler rent growth -– or even rent declines — as these new apartment units are delivered,” Bright MLS chief economist Lisa Sturtevant said in a statement.
The improvement in housing starts comes amid increasingly challenging conditions for builders, who have seen demand drop off as mortgage rates rise above 6 percent, and inflation keeps construction costs high.
These conditions have seen builder confidence in the market drop to the lowest level in eight years, as measured by the Wells Fargo Housing Market Index, which fell three points this week to a score of 46.
Sales of new homes have dropped considerably in recent months, falling 29.6 percent in August as more and more homebuyers found themselves pushed out of the new homes market by high mortgage rates.
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