August Housing Starts Down 14.4%; Reverses July Rise

After the dramatic surge in July, the U.S. housing construction and building permits figures declined in August disappointing market expectations.

Data released by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau on Thursday showed that housing starts declined 14.4% in August to an annualized rate of 0.956 million units propelled by a massive fall in multi-family production.

Single-family housing starts declined 2.4%, while multi-family production fell 31.7%.

Building permits, a gauge of future construction, declined 5.6% in August, pulling back after the surge in July. Multi-family permits went down 12.7% while single-family permits decreased 0.8%.

Nevertheless, housing starts were up 8% year over year indicating that the August drop is not that horrifying.

Though the August housing production numbers raise concern about the volatility of the housing market, the broader housing trends look solid as demand for new homes increases with the improving job market. Moreover, rising inventory levels, low mortgage rates and moderating home prices are expected to give homebuyers the much needed confidence paving the way for higher home demand for the rest of the year.

The homebuilders also have an optimistic outlook for the upcoming months as indicated by the homebuilders’ confidence data for September, released on Wednesday, Homebuilders’ confidence, as indicated by the National Association of Home Builders (NAHB)/Wells Fargo housing market index, rose 4 points to 59 in September — the highest level since Nov 2005 and the fourth consecutive monthly gain for the index.

After rising on Wednesday following upbeat homebuilder confidence data, homebuilder stocks like KB Home (KBH), Lennar Corporation (LEN), PulteGroup Inc. (PHM), DR Horton, Inc. (DHI), Hovnanian Enterprises Inc. (HOV) and Ryland Group, Inc. (RYL) dropped slightly on Thursday.

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