HUD and Commerce Say Housing Starts Drop Slightly

The New Residential Construction report showed housing starts down 1.3 percent from the July figure which was itself adjusted downward from preliminary estimates released in late August.

Housing starts for August are preliminarily projected at 2,009,000 compared with July's adjusted figure of 2,035,000. The original July projection was for 2,167,000 units.

However, single family housing starts in August actually increased by 2,000 units (or 0.1 percent) over the revised July figures. This report consistently fails to report data on housing starts or units under construction in the two to four unit category with the explanation that the data "does not meet publication standards because tests for identifiable and stable seasonality do not meet reliability standards." Therefore, the decline in starts, which was headlined by CBS Market Watch and other news services, turns out to be confined to the five units or more category where starts dropped from a revised figure of 292,000 units in July to a preliminary estimate of 256,000 units in August.

In other words, the single family market appears to still be steaming ahead.

At least the nation overall is still building like crazy. Regionally the figures were all over the place. In the Northeast and West housing starts were up 2.2 percent and a whopping 11.5 percent respectively. In the Midwest and South they dropped 4.7 percent and 4.4 percent since July.

Compared to figures for one year ago, August 2005 looked strong, except, again, for the Midwest. For the nation as a whole housing starts were running 1.2 percent ahead of one year ago (although multi family starts were off 4.5 percent, dragging the total starts figure down) and were in the positive column by 1.5 percent in the Northeast, 1.4 percent in the South, and 6.1 percent in the West. The Midwest was down 6.5 percent.

One of the interesting figures in the Commerce/HUD report is the number of privately-owned housing units permitted by local authorities but where construction was not yet underway by the end of the reporting period. The information is not presented in a way which will allow any real conclusions as to whether builders and developers are pulling back from earlier plans; for example, there is no information about the time lapse since the permits were issued. However, projects for which permits had been issued (and were still valid) but that had not been started by the end of August were at a high for the year - 238,700 units, up 5.7 percent from last month and 22.3 percent from August of 2004.

Notes to the report caution that "month-to-month changes in seasonally adjusted statistics often show movements which may be irregular. It may take four months to establish an underlying trend for building permit authorizations, six months for total starts and six months for total completions."

With that caveat, it is noted that permits issued in those localities requiring them were down 2.2 percent in August compared to July, with only the South showing any increase in permitting. Still, permits for August 2005 compared to August 2004 were up 3.2 percent nationally.