Total housing starts dropped 6.0 percent in August to a seasonally adjusted annual rate of 1.665 million units, according to figures released by the Commerce Department. The pace of new-home construction was down 19.8 percent from a year earlier, which was a record-breaking year.
Builders slowed the pace of single-family home construction by 5.9 percent for the month to 1.360 million units, a 20.6 percent drop from a year earlier. Multifamily housing construction was down 6.7 percent for the month to a seasonally adjusted annual rate of 305,000 units, 15.7 percent lower than the August 2005 pace.
“Builders have been reporting a weakening in demand for some time and appropriately are cutting back on new supply in order to meet current market conditions and control their inventories,” said David Pressly, president of the National Association of Home Builders (NAHB) and a home builder from Statesville, N.C. “Many builders also are offering substantial incentives to bolster sales and limit cancellations, and with mortgage rates still very favorable, now is a good time to buy.”
“We are in the midst of an inevitable adjustment following the housing boom of 2004-2005 when housing market activity soared to unsustainable levels,” said NAHB Chief Economist David Seiders. “The downward adjustment to housing production should run its course by mid-2007. The market that emerges from this correction will display good balance between supply and demand and move to a healthy and sustainable trend based on solid underlying fundamentals.”
“Home buying conditions actually are quite favorable at this time,” Seiders added. “There are a lot of homes on the market, mortgage rates are at historically low levels, house prices are softening and household income growth is proceeding in some areas. These developments are improving the affordability of home buying.”
Regionally, housing starts declined in three of four regions during August. Construction of new homes and apartments was down 6.1 percent in the South, 5.5 percent in the West and 12.2 percent in the Midwest. Housing starts rose in the Northeast by 5.4 percent for the month, following a 12.5 percent decline the month before.
Issuance of total building permits decreased 2.3 percent in August to a seasonably adjusted annual rate of 1.722 million units, 21.9 percent below the pace of a year ago. Single-family permit issuance was down 3.5 percent on a national basis to a pace of 1.279 million units for the month. The pace of multifamily permit issuance was up 1.1 percent to 443,000 units, although this pace was 11.2 percent below August 2005.