Home construction rebounds from July slump to top August expectations

Housing starts bucked expectations in August, with a seasonally adjusted annual rate of 1.615 million units, according to new data from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.

Economists polled by Reuters were anticipating a pace around 1.555 million units, so August’s data — a monthly uptick of 3.9% and a yearly gain of 17.4% — marked an encouraging rebound from July’s backtrack in construction. That month’s figures did get a bit of a boost as well, with July starts revised upward to 1.554 million units from the previously reported 1.534 million.

“Despite ongoing shortages of key building materials and a tight construction labor market, the nation’s homebuilders are finding ways to defy expectations, keep their pipelines moving and put up more homes,” said Zillow economist Matthew Speakman. “Homebuilder confidence ticked up slightly in September and appears to have leveled off after falling through the summer, suggesting that builders remain bullish on the idea that they will be able to quickly sell the homes they put up.

“It’s not all perfect, and some creativity is being shown by builders to keep things moving.”

Single-family housing starts remained on a downswing, falling 2.8% below the revised July building rate in the segment. August’s rebound was fueled by strength in the multifamily space, with construction in the sector up 20.6% to a seasonally adjusted annual pace of 539,000 units. The pickup is in line with the outlook from the National Association of Home Builders, which, according to chairman Chuck Fowke, is “expecting a solid gain for apartment construction” in 2021 after a slight decline last year.

It’s worth noting that the strength in multifamily construction isn’t coming at the expense of single-family building. The weakness in the single-family building market isn’t due to lack of demand; rather, despite continued easing of lumber pricing, the aforementioned supply shortages remain a massive hindrance. Shortages persist in essential building inputs, including windows, electric breaker boxes and wedge anchors, according to Wells Fargo. Similar to the situation in the auto manufacturing sector, holdups in the acquisition of a single part are often holding up home construction.

And despite the drop in starts, August’s building report did offer rosy data for the single-family market as well. Single-family permits are up marginally from July, but single-family completions grew 2.8% to an annual rate of 971,000 units, the fastest pace since April.

“More inventory is coming for a market that continues to face a housing deficit,” said Robert Dietz, chief economist for the NAHB. “The number of single-family homes under construction in August — 702,000 — is the highest since the Great Recession and is 32.7% higher than a year ago.”


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