Housing Starts Edge Down 2.2 Percent in August Following Healthy First Half

Following an exceptionally strong pace set in this year's first half, U.S. housing starts slowed 2.2 percent to a still-healthy seasonally adjusted annual rate of 1.6 million units in August, the Commerce Department reported. The decline was confined entirely to the single-family sector and was largely focused in the Midwest, where rainfall was above normal for the month.

“Solid market fundamentals — including historically low mortgage rates and lean builder inventories — plus the results of our latest builder surveys show that the housing industry remains on very solid ground,” said Gary Garczynski, president of the National Association of Home Builders (NAHB) and a builder/developer from Woodbridge, Va. He noted that while NAHB's Housing Market Index (HMI), a monthly gauge of builder sentiment, indicated weaker conditions in August, the September index, released, showed rejuvenated confidence among single-family builders. “Based on that and today's good permit numbers for single-family units, we wouldn't be surprised to see a bump in production in the government's next report.”

Single-family housing starts slipped 4.4 percent in August to a rate of 1.25 million, their slowest pace since last November. Meanwhile, multifamily starts rose 6.3 percent to 357,000, their best pace since May. On a regional basis, starts fell most in the Midwest, where an 18.7 percent shortfall was recorded, while the West posted a more moderate decline of 1.6 percent. The Northeast and South each posted solid gains, of 9.4 percent and 3.1 percent, respectively.

Housing permits, which can be an indicator of future building activity, fell 2.5 percent overall, due entirely to a 15 percent decline on the multifamily side, which tends to fluctuate significantly from month to month. Single-family permits rose 1.7 percent to 1.3 million units, their highest level since February.

“The fact of the matter is, housing remains one of the healthiest and most stable sectors of the economy,” said NAHB Chief Economist David Seiders. “We are forecasting 1.66 million housing starts for 2002 as a whole, up 3.5 percent from last year.”