Steel Markets

South Drags Down Housing Starts and Permits in August

September 19, 2016

Housing starts were down 5.8 percent from July to August. The U.S. Census Bureau and the Department of Housing and Urban Development reported starts were at a seasonally adjusted annual rate of 1,142,000, 0.9 percent higher than year ago levels. Single family starts were down 6.0 percent and multi-family down 6.9 percent. The housing starts improved in the Northeast, Midwest and West in August, declining only in the South.

Housing permits authorizations, an indicator of future building, inched down 0.4 percent from July to August and were down 2.3 percent from August 2015. The seasonally adjusted annual rate for permits was 1,144,000 for the month. Compared to the previous month, single family authorizations increased 3.7 percent and permits for buildings of five or more units decreased 8.4 percent. The decline in permit authorizations, like housing starts, was entirely in the South.

The increase in permits for single family housing concurs with a solid increase in builder confidence for September. A monthly survey by the National Home Builders Association indicates builders are seeing more serious buyers in the market, a positive sign for the housing market. All three components in the Housing Market Index rose in September and NAHB expects to see continued upward movement throughout the rest of 2016 and into the new year.

“After two months of gains, the housing market gave back a bit in August,” said Ed Brady, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Bloomington, Ill. “However, with builders reporting low inventory levels and rising confidence, we expect more consumers will return to the market in the months ahead.”

Lack of qualified construction workers continues to be a problem for the industry. Kristen Reynolds, US Economist at IHS Global Insight commented, “New home building is being constrained by lack of available skilled labor, despite increases in compensation. The ratio of construction job openings to hires this summer was at its second highest level in the more than 15-year-history of the series.”