Housing Starts: Sharp Rebound, Trend Still Concerning

Bottom Line:  Housing starts rose more than expected in August, but there were negative revisions to previously reported months, and permits slipped further. Moreover, the August rebound was driven by multi-family, which has remained volatile but more resilient than single-family starts. For now, these hard data suggest housing activity has given back all of its post-pandemic gains with starts running at levels seen in 2019. However, soft survey data, like the National Association of Homebuilders' Survey reported yesterday (charts at bottom of this report), suggest a sharper decline. The NAHB survey index suggests current activity has plunged to levels not seen since 2013. And the outlook and buyer traffic components of that survey were back to 2011 levels. Overall, single-family construction activity turned from a tailwind to a sharp headwind for economic growth in the 2nd Half of 2022. While strength in multi-family provided a modest offset to some of the initial weakness, all signs suggest housing will be a large drag on growth late in the 3rd Quarter and into the 4th Quarter.

Total US Annualized Housing Starts ROSE 171k to 1.57M, ABOVE the 3-Month average of 1.52M, BELOW the 6-Month average of 1.61M, nearly in-line with year-ago level of 1.576M.Single-Family Starts ROSE 31k to 935k, BELOW the 3-Month average of 950.67k, BELOW the 6-Month average of 1.05M and 160k BELOW the year-ago level.  Multi-Family Starts ROSE 138k to 621k, ABOVE the 3-Month average of 552.67k, ABOVE the 6-Month average of 541.17k and 147k ABOVE the year-ago level.

Total Building Permits FELL 168k to 1.52M, BELOW the 3-Month average of 1.63M, BELOW the 6-Month average of 1.72M and 255k BELOW the year-ago level.