Housing starts rise as multi-family construction hits an all-time high.
After sharp decreases in two of the three most recent months, housing starts surprised with an increase of 12.2% in August. The rate of housing starts during the month fully rebounded to the rate in June. Housing starts in August were just barely (0.3%) above the level in the pre-pandemic month of February 2020. Starts of single-family homes increased by 3.4% for the first gain since February. The month’s real strength, however, came from starts of multi-family units, which jumped 28.6% for the largest increase since January 2021. The seasonally adjusted annual rate of 621,000 units in multi-family buildings is the highest on record, narrowly edging out the rate posted in April. Steadily rising home prices have forced many buyers to consider condominiums and apartments rather than single-family homes. Single-family starts were about 10% below February 2020 while multi-family starts were nearly 21% higher.
Forward-looking data is not so rosy, however. Permits authorized for future residential construction dropped 10% in August for the largest decrease since April 2020. All housing types saw declines in permits, but the largest was for buildings with five or more units. Permits in August were still higher than pre-pandemic levels but only by 4.1%. That comparison had been in double digits since October 2020. Home completions fell 5.4% in August after rising 2% in July. Completions have been volatile month to month throughout the pandemic, apparently due to disruptions in the supply of materials and labor.
The number of homes under construction rose 1.6% to an all-time high after dipping 0.7% in July. The Census Bureau counts a home as being under construction once site preparation is reported. Therefore, it is possible that a portion of those units is not still actively under construction as purchasing demand has fallen this year.
Sales of existing homes
Sales of existing single-family homes declined 0.9% in August for the seventh straight month of decreases.
If there is any positive spin on the figures it would be that 0.9% is the smallest decrease during that period. Existing-home sales in August were down 19.2% y/y and 16.2% below February 2020. Declining demand has begun to soften prices. The median sales price for a single-family home sold fell for the second straight month to $396,300 after hitting a record $420,900 in June. Home sales prices are still about 45% higher than in February 2020.
Mortgage rates
Mortgage rates rose sharply in the latest week. The average rate on a 30-year fixed-rate mortgage increased more than a quarter point to 6.29%, which is the highest since late October 2008, according to data released by Freddie Mac. Over the past five weeks, mortgage rates have risen 1.16 points.
Industrial production
Industrial production in August declined 0.2% – not an especially large decline though it is the largest since one of the same magnitudes in December. It was only the second month-over-month drop this year. Recent increases also have been smaller, so it appears that industrial production could be flattening out. However, the big issue was in utilities, which saw output in August decline 2.3% – perhaps due to the month not being quite as hot as July throughout much of the country. Not surprisingly, changes in utilities output are heavily tied to changes in the weather. Mining output was flat after three straight months of solid gains.
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