Housing Market Gains Momentum
Building permits and housing starts jumped last month, signaling renewed activity in the new construction segment of the U.S. housing market. According to the latest data from the U.S. Census Bureau and the Department of Housing and Urban Development, the number of privately-owned housing units authorized by building permits jumped by 4.9%, reaching a seasonally adjusted annual rate of 1.475 million (a healthy increase from July’s revised figure of 1.406 million).
Despite this progress, August’s data still lags behind last year’s rate by 6.5%, as building permits were issued at a rate of 1.578 million in August 2023. Nevertheless, the rise in permits is a positive development for an industry that has faced considerable challenges, including fluctuating mortgage rates and supply chain disruptions.
Single-Family vs. Multi-Unit Permits
While the growth in building permits extended across various segments of the housing market, 2-4 unit dwellings led the surge with a 16.3% month-over-month increase. Permits for buildings with 5 units or more clocked in at 6.4% above the prior month, and single-family dwellings trailed with a 2.8% gain.
The uptick in building permits for single-family homes signals that additional inventory will be brought to market to help alleviate the ongoing supply constraints in the housing market, the data shows that the majority of the inventory growth will impact the supply of available rental units.
Housing Starts Surge 9.6% from July
In addition to the growth in building permits, privately-owned housing starts also posted a strong performance in August. Housing starts surged by 9.6% to a seasonally adjusted annual rate of 1.356 million, a sharp improvement over July’s revised rate of 1.237 million. This number is also 3.9% higher than the 1.305 million housing starts recorded in August 2023.
Notably, single-family housing starts experienced substantial growth, jumping 15.8% from the previous month to 992,000 units. This surge in single-family construction reflects increased optimism among builders, who are ramping up efforts to meet the ongoing demand for new homes. At the same time, multifamily housing starts, including buildings with five or more units, remained steady at 333,000 units.
The uptick in housing starts is likely a response to improving financing conditions and stabilizing interest rates, which have encouraged developers to break ground on new projects. This momentum could help ease some of the affordability challenges in the housing market, especially if more inventory becomes available in the months ahead.
Housing Completions Rise, But Single-Family Homes Lag
Housing completions also saw strong gains in August, rising by 9.2% to a seasonally adjusted annual rate of 1.788 million. This marked a notable increase from July’s revised rate of 1.637 million and was 30.2% higher than the completion rate in August 2023.
However, while overall completions increased, the single-family home segment struggled. Completions in this category declined 5.6%, dropping from July’s rate of 1.090 million to 1.029 million in August. In contrast, multifamily completions surged to 740,000 units, reflecting continued demand for rental properties and urban living spaces.
Cautious Optimism Amid Persistent Challenges
The data from August paints a generally optimistic picture for the U.S. housing market, with both building permits and housing starts on the rise. This growth could be a welcome relief for homebuyers, as additional supply comes to market. However, the decline in single-family home completions highlights ongoing hurdles for builders, particularly rising material and labor costs.
As the housing market moves into the final months of 2024, builders will need to maintain this momentum to keep pace with demand. If construction activity continues to expand, it could help ease price pressures and improve housing affordability, benefiting both buyers and the broader economy.
(Source: census.gov)
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