WASHINGTON, DC-New single-family housing starts reached 891,000 in August from a revised 883,000 the prior month, while building permits reached a seasonally adjusted 918,000, including 268,000 for multifamily projects, according to Commerce Department data released Wednesday. Both figures represented year-over-year improvements but offered a mixed comparison to July numbers, with starts up 0.9% and permits down 3.8% compared to July. Analysts polled by Bloomberg had projected a median figure of 917,000 for new starts.

The Commerce Department data followed Tuesday's report by the National Association of Home Builders that the builder confidence index was unchanged at 58—the highest level since 2005—following four months of steady improvement. “Following a solid run-up in builder confidence over the past year, we are seeing a pause in the momentum as consumers wait to see where interest rates settle and as the headwinds of tight credit, shrinking supplies of lots for development and increasing labor costs continue,” says the association's chief economist, David Crowe.

Further, NAHB says that results of its latest NAHB/Wells Fargo Housing Market Index, derived from a monthly survey conducted for the past 25 years, were mixed in September. Although the component gauging current sales conditions held unchanged at 62 from the month prior, sales expectations for the next six months declined three points to 65 and the component gauging traffic of prospective buyers increased one point, to 47.

Patrick Newport and Stephanie Karol, US economists at HIS Global Insights, write in a commentary that both housing permits and housing starts in August “disappointed.” A three-month moving average shows permits have flattened nationally and in the West and Midwest, while rising in the Northeast and dropping in the South. The decrease in the South brought multifamily permitting down for the month, they write.  

With regards to housing starts, they write, “Given the role that weather likely played in suppressing starts in June and July—June 2013 was the 13th wettest June on record, while July was the fifth wettest—a strong August bounce-back in housing starts appeared a shoo-in. Instead, housing starts increased only 0.9%.”

However, Newport and Karol note that it's not time to push the panic button just yet. For one thing, there's the continued strong in the NAHB confidence index; for another, there's a Census Bureau report that the number of US households increased by an estimated 1.375 million in the 12 months ending March 31.

“If the number of households is increasing by 1.375 million, then underlying demand, which consists of new households forming, replacement demand (250,000, annual rate), and second-home demand (50,000, annual rate), is far outpacing new supply (which mainly comes from housing completions—769,000 in August)—fantastic news for the housing outlook,” they write. They caution, however, that “counting the number of households is difficult, and there is no way of knowing for sure whether the latest Census estimate is close to the mark.”

Commenting on the NAHB's latest numbers, Sterne Agee chief economist Lindsey Piegza observes that it remains to be seen if a further increase in interest rates will undercut demand for homes.  “The housing market has been one of the silver linings in the recovery but with minimal income growth and tepid savings, rising rates could undermine the consumer's ability to take on additional mortgage debt, adding risk to the recovery.”