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Housing starts fall in August

Overall housing starts fell slightly in August, but the pace of single-family home building continues to gain steam. Housing economists, which have repeatedly blamed sluggish home building for exacerbating the tight market for home sales, gave mixed reviews about the state of affairs in building.

Economists do expect that housnig-start data will be volatile over the next few months as the building industry responds to the devastated areas of Texas and Florida.

homebuild“This month’s report shows that single-family starts continue to move forward at a gradual, consistent pace,” said Robert Dietz, chief economist for the National Association of Home Builders (NAHB). “The three-month average for single-family production has reached a post-recession high, but the months ahead may show volatility given that the building markets affected by Hurricanes Harvey and Irma represent about 14 percent of national production.”

Overall starts ran at an annual pace of 1.18 million, down 0.8 percent from the revised July estimate. Starts were still running 1.4 percent above the August 2016 level.

The overall numbers fell over the month because multifamily starts declined. Multifamily starts ran at an annual pace of 323,000, which was down 5.8 percent from the July level and down 23.1 percent from the August 2016 pace.

Single-family starts, which have been the most closely watched by housing economists, ran at annual pace of 851,000, up 1.6 percent from July and 17.1 percent ahead of the pace a year earlier.

Regionally, single-family starts ran well ahead of the August 2016 pace in the Northeast (up 26.9 percent year over year); the South was up 22.8 percent; and the West jumped by 14.6 percent. Single-family starts fell year over year in the Midwest (down 2.7 percent).

First American Chief Economist Mark Fleming said builders continue to be hampered by shortages of labor and available lots. Devastated areas will likely temporarily create more demand for workers. Overall, however, building trends indicate that supply shortages “may be losing steam,” Fleming said.

“Based on the less volatile three-month moving average, total residential single and multifamily housing starts are higher than last month, and 2,000 units higher compared to a year ago,” Fleming said. “It looks like we are finally seeing improved residential employment numbers translate into more homebuilding.” Fleming also noted that permitting is up, an indicator of future starts.

Other economists are less optimistic, however.

“The shortage of labor in construction will further intensify as more workers concentrate on rebuilding rather than on new construction,” said Lawrence Yun, chief economist for the National Association of Realtors. “The nation’s housing shortage unfortunately looks to be with us well into the next year.”


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