Housing Starts: Sharp Drop, Permits Offer Hope

Bottom Line: Housing starts fell sharply in August, much more than expected, hitting the lowest levels since the pandemic. The aways-volatile multifamily sector led the declines, though, suggesting the magnitude of the decline was likely just normal volatility. That said, amid higher mortgage rates, single-family declined modestly. Rates are having an impact on builders' outlooks. The National Association of Homebuilders reported yesterday a second month of declines in prospective buyer traffic in August after seven months of higher readings earlier this year. On the plus side, building permits rose in August. Overall, housing starts looked like they would quickly swing from bottoming to a complete rebound. But that notion is in jeopardy now. While structural, demographic-led demand for housing exists, developers appear worried that higher mortgage rates will hamper potential buyers.

Total US Annualized Housing Starts FELL 164k to 1.28M, BELOW the 3-Month average of 1.38M, BELOW the 6-Month average of 1.41M and 222k BELOW the year-ago level. Single-Family Starts FELL 42k to 941k, BELOW the 3-Month average of 951.33k, ABOVE the 6-Month average of 926k but 22k ABOVE the year-ago level.

Multi-Family Starts FELL 119k to 334k, BELOW the 3-Month average of 420k, BELOW the 6-Month average of 471.17k and 232k BELOW the year-ago level.