Nationwide housing starts declined 6.2 percent in August as home builders continued to cut back on new construction in order to scale back their inventories and help pave the way for a housing market recovery, according to figures released by the U.S. Commerce Department.
“Builders understand that there is still a substantial amount of unsold inventory to be worked down, and they continue to do the right thing by reducing production and pulling fewer permits for new homes to help restore better balance between supply and demand,” said Sandy Dunn, National Association of Home Builders (NAHB) president and a home builder from Point Pleasant, W.Va. “With help from the new first-time home buyer tax credit and improving rates on home mortgages, the long downswing in production activity is slowly but surely putting us back on track to a healthy housing market.”
“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,” said NAHB Chief Economist David Seiders. “Meanwhile, the government takeover of Fannie Mae and Freddie Mac and the ongoing turmoil on Wall Street actually have produced downward pressures on key home mortgage rates, which should also help get more buyers to the table. 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.”
Total housing starts fell 6.2 percent to a seasonally adjusted annual rate of 895,000 units in August, the slowest production pace since January 1991. 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 — 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 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.