WASHINGTON, DC—Housing starts for August dropped more than what economists had been expecting, according to the Commerce Department report released Thursday morning. However, the agency also revised upward the previous month's starts, leaving the industry with the sense that the housing market recovery continues to plod along.
Still, though, the drop was disconcerting, especially considering that multifamily led the dive.
Beginning home construction fell 14.4%, the most since April 2013, to a 956,000 annualized rate. The good news was that the revised numbers for July, a 1.12 million pace, was the strongest since November 2007. Also, August's 2014 starts are 8% above the August 2013 rate of 885,000.
It was the construction of multifamily projects that drove this August's decline: this group posted a 31.7% drop to an annual rate of 313,000, the fewest number of apartment buildings begun since October.
These figures are at odds with a recent report from Freddie Mac that construction of apartment buildings has hit the highest monthly pace since the beginning of 2006—and that absorption rates are matching that pace.
Taken as a whole, the year could be deemed flat in terms of housing construction, according to a blog post by Brad Hunter, chief economist of Metrostudy, in which he analyzes the numbers.
"Totaling all housing starts in 2014, the number is only going to end up a few percentage points higher than in 2013," he writes.
"Single-family starts fell 80% during the downturn, and have since only made it back to about 50% of 'normal,'" he continued. "Improving demand, combined with a need for public homebuilders to open more communities, will push the level of starts higher by 15% to 20% next year."
That said, there is definitely momentum in specific markets, Hunter continued.
There have been significant gains versus a year ago in Atlanta (+16.2%) and Nashville (+11.0%), based on Metrostudy's own data. Southern California is also up sharply compared with this time a year ago (+16.7%), and Chicago has pulled itself up a bit from its recently extremely low levels as well (+15.4%).
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