Housing Starts at 17-Year Low

The construction of new homes was down in August as homebuilders continue an effort to reduce housing inventories.

Housing starts were down 6.2 percent in August, representing the slowest pace in 17 years, according to figures released by the U.S. Commerce Department.

Building permits were also down in August, continuing an effort by homebuilders to reduce current housing inventories.

“Our latest builder surveys have indicated a substantial improvement in builders’ sales expectations for the next six months, in part because of the newly enacted tax credit,” acknowledged NAHB Chief Economist David Seiders. “But until sales have clearly turned the corner, it’s very important that builders continue the process of pulling in the reins on new production, which is exactly what they are doing and is right in line with our forecast. NAHB continues to project a stabilization of new-home sales in the final quarter of 2008 which should, in turn, allow production to begin a slow and steady recovery by the second quarter of 2009.”

Single-family starts fell 1.9 percent to 630,000 units, while multifamily starts – still evening out after a huge bump in June that was tied to a New York City building code change – declined 15.1 percent to 265,000 units.

Two out of four regions posted double-digit declines in total housing starts for August, including the Northeast (down 14.5 percent) and the Midwest (down 13.6 percent). The South posted a 7.4 percent decline in housing starts in August, while the West registered a 10.8 percent gain following an equivalent decline in July.

Permit issuance, which can be an indicator of future building activity, also fell to a 17-year low in August. Total permits were down 8.9 percent to a seasonally adjusted annual rate of 854,000 units, with single-family permits down 5.1 percent to 554,000 units and multifamily permits down 15 percent to 300,000 units.

On a regional basis, total permits fell 21 percent in the Northeast, 9.9 percent in the South and 7.1 percent in the West. Permit issuance edged up by 0.7 percent in the Midwest.

Privately owned housing completions in August were at a seasonally adjusted annual rate of 961,000. This is 9.8 percent below the revised July estimate of 1.065 million and is 35.8 percent below the revised August 2007 rate of 1.498 million. Single-family housing completions in August were at a rate of 676,000; this is 17 percent below the July figure of 814,000. The August rate for units in buildings with five units or more was 269,000.

Sources: Commerce Department, NAHB