Housing Starts Rise in August Amid Ongoing Affordability Concerns

September 19, 2018

Total housing starts increased 9.2 percent in August to a seasonally adjusted annual rate of 1.28 million units, according to newly released data from the U.S. Department of Housing and Urban Development and the Commerce Department.

The August reading of 1.28 million is the number of housing units builders would start if they maintained this pace for the next 12 months. Within this overall number, single-family starts increased 1.9 percent to 876,000 units. Meanwhile, the multifamily sector—which includes apartment buildings and condos—increased 29.3 percent to a total of 408,000.

“Builders remain largely confident because the economy is solid and demographics point to continued demand,” said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La. “However, affordability continues to be a concern for both builders and buyers.”

While housing production rose, overall permits—which are an indicator of future housing production—dropped 5.7 percent to 1.23 million units in August. Single-family permits fell 6.1 percent to 820,000 units, and multifamily permits dropped 4.9 percent to 409,000 units.

“Although we saw an increase in starts in August, we are likely to see softening in the market in the months ahead,” said NAHB Chief Economist Robert Dietz. “Affordability is a particular concern because of home price gains, due in part to the high regulatory burden on new home construction. Increasing costs for building materials prompted partially by recently imposed tariffs on a wide range of products are also a concern. Moreover, interest rates are continuing their gradual upward climb.”

Regionally, the West led the nation with a 19.1 percent increase in combined single-family and multifamily housing starts. Unchanged in the Northeast, starts increased 9.1 percent in the Midwest and 6.5 percent in the South.

Led by a 19.2 percent decline in the Northeast, permits decreased in every region. They were down 1.7 percent in the Midwest, 2.9 percent in the South and 8.4 percent in the West.