WASHINGTON — August housing data suggest a stalling in the housing market at a better level in the face of higher interest rates.
August housing starts disappointed at a 0.9% rise to 891,000 and permits at a 3.8% decline to 918,000, were lower than expected. The results probably reflect buyer and builder caution as higher rates make housing less affordable.
Starts were soft due to a 9.4% drop in 5-plus units, with declines in three regions. Single starts were up 7.0% to 628,000.
Starts were down 8.2% in the Northeast, down 3.3% in the Midwest, and down 10.9% in the West. But the South gained 12.0% -- this is the largest region by geography and by housing spending and was why the total advanced a little. Starts remain up 19% over the year, illustrating housing recovery.
Permits suggest there will not be a surge in building ahead. Single permits were up 3% to 627,000, right in line with starts. As expected, multi-unit starts were lower, with 5+ units down 15.7%.
Completions are running at 769,000, still below the expected one million household formations that has been the historical norm, suggesting home pricing should hold up on a lack of supply. Completions are holding at a little higher pace than in the spring.
A bottom line is that this is a disappointing report at odds with more upbeat monthly builder reports. The latter might reflect on-going optimism that housing remains better than a year ago.
Market News International is a real-time global news service for fixed-income and foreign exchange market professionals. See www.marketnews.com.