Plummeting Housing Starts Data Not as Scary as it Looks

Housing starts 'plummeted' in August the Census Bureau said today, falling 14.4 percent from the revised seasonally adjusted annual rate of 1,117,000 units in July to 956,000 units.  The abrupt change, however was driven by a 31.5 percent decline in initial construction of buildings containing 5 or more units.  Single-family construction starts were down only 2.4 percent.  Not only that, but last month's numbers were revised significantly higher.

The August New Residential Construction report, jointly issued by Census in conjunction with the Department of Housing and Urban Development, revised the July housing starts upward from the original 1,093,000 annual pace reported last month, already a 15.7 percent increase over June.  Despite the decrease in starts in August, the seasonally adjusted number was still 8.0 percent higher than the rate of 885,000 units reported in August 2013. 

"Bottom line, today's report was actually pretty good," said Mortgage News Daily COO Matt Graham, "certainly not as bad as the headline might make it seem.  Multifamily stats have been a volatile contributor to the data.  They made several weaker reports look stronger and now the opposite.  I'd personally focus on the fact that Single Family Starts were only down 2.4 percent from a really stellar reading in July.  In fact July was the 3rd highest month since the crash and today's report is the 5th highest."

Single-family starts in August were at an annual rate of 643,000 compared to 659,000 (revised from 656,000) in July and was 4.2 percent above the 617,000 starts a year earlier.  Multifamily starts dropped from an annual rate of 444,000 in July to 304,000 in August and were 19.2 percent below the annual rate the year before.

On a non-seasonally adjusted basis there were 86,000 housing starts in August compared to 102,800 in July.  Single family starts were down from 61,900 to 58,800 and construction of units in buildings with five or more fell from 39,700 units to 26,400.

Permits for new construction were also down, but not as dramatically. Permits were issued at a seasonally adjusted annual rate of 998,000 in August, compared to a revised (from 1,052,000 units) July rate of 1,057,000.  This was a decrease of 5.6 percent.  Permitting was still 5.3 percent above the rate the previous August of 948,000.

Single family permits were issued in August at a rate of 626,000, down 0.8 percent from both the revised July number of 631,000 (originally 640,000) and the previous August's identical number.  Multifamily permits were issued at the rate of 343,000, down 13.4 percent from August and 17.5 percent from a year earlier.

On a non-adjusted basis permits in August totaled 86,800 compared to 97,600 in July and 87,100 in August 2013.  Fifty-five thousand of those permits were for single family construction down from 60,200 the previous month and 58,000 the previous year.  Multifamily permits totaled 29,200 compared to 34,600 and 26,700 in the two earlier periods.

Housing completions rose for the month to a seasonally adjusted annual rate of 892,000, up 3.2 percent from July and 16.9 percent from the August 2013 rate of 763,000.  The number of July completions was revised from 841,000 to 864,000.

Single family housing completions in August were at a rate of 591,000, down 8.2 percent from July's revised rate of 644,000 (from 635,000).  There were 292,000 units (annualized) completed in multifamily buildings compared to 213,000 in July, an increase of 37.1 percent.

Housing starts and permits were down from the previous month in every region while housing completions rose in two.  In the Northeast starts declined by 12.9 percent from July but were up 24.7 percent on an annual basis. Permits were off by 11.6 percent month-over-month and 13.0 percent year-over-year.  Housing completions rose by 31.6 percent for the month and 46.5 percent for the year.

The Midwest saw 10.3 percent fewer starts for the month but pulled out a 4.7 percent annual gain.  Permits decreased by 12.4 percent from July but were unchanged from a year earlier.  Completions were down by 3.8 percent and 12.8 percent in monthly and annual comparisons

In the South there was a -10.9 percent month-over-month change but starts were up 7.5 percent compared to the previous August. Permitting slipped by a slight 0.6 percent from July and was up 17.9 percent from the previous August. Completions were 0.2 percent lower than in July and 7.4 percent higher than a year earlier.

In the West the monthly change in housing starts was -24.7 percent with a 3.6 percent annual gain.  Permits were down 8.3 percent for the month and 5.2 percent compared to a year earlier.  Housing completions were up 5.3 percent from July and 22.7 percent from August 2013.

At the end of August there were a total of 794,000 units under construction, 6,000 more than in July.  An estimated 350,000 were single-family units.  At the same time there were an estimated 108,500 permits that had been issued but for which construction had not yet started.  An estimated 56,400 of those units were single family and 50,100 were in multi-unit buildings. More than half of the units under construction (354,000) and the lion's share of backlogged permits (63,000) were located in the South.