Total housing starts came in near expectations for August, but not for the reasons analysts were expecting. New construction projects for single-family homes unexpectedly skidded after five consecutive monthly gains, while starts for multi-family units rebounded more than forecasts.
The total number of housing starts came in at 598k, just 2k below the consensus forecast. But, rather than being driven by single-family starts, the number was elevated due to revisions for July ― 589k compared to an original estimate of 581k ― and a boost in multi-family units, which may bottomed out in July.
New construction projects for single-family homes slid 3.0% in August, pushing the annualized rate to 479k from the revised July read of 494k new starts per year.
Starts for multi-family units pushed up 35.3% in the month, putting the annualized pace up 30k to 115k.
“It would appear that housing construction has turned the corner and the residential structures investment drag on GDP growth will be small, if any, in the third quarter,” said analysts at RDQ. They noted, however, construction activity “is at a very low level in absolute terms.”
Indeed, compared to August 2008, total housing starts remain down nearly 30%. But on the flipside, the third-quarter improved 14.5% relative to Q2.
The data is “consistent with a small gain in residential investment this quarter, which would end the streak of 14 consecutive quarterly declines,” noted Joseph LaVorgna, chief US economist at Deutsche Bank.
Regionally, data showed the gains were almost solely in the Northeast, which saw a 23.8% gain in the month. The Midwest was modestly higher with a 0.9% gain, while the West was flat, and the South fell 2.4%.
Building permits, which anticipate starts by a month or two, were 2.7% above the July rate with an annual rate of 579,000. Single-family permits were 0.2% down from July, which doesn’t breed much optimism for a rebound in housing starts in September, but the 15k gain in multi-family units points to further stabilization.