US housing starts, permits show recovery is on track
Growth in US housing starts and building permits was slower than expected last month, according to an official report from the Commerce Department.
Privately-owned housing starts in August rose 0.9 percent over the revised July estimate of 883,000. In total, there were 891,000 housing starts last month, compared to expectations for 917,000. Multi-family home starts fell more than 11 percent to a 264,000-unit rate, whereas single-family home starts increased 7 percent to a 628,000-unit rate, the highest in seven months.
Single-family homes represent the largest segment of the market. The August data show continued growth for this segment of the housing market, despite rising mortgage rates. Although housing starts didn’t keep pace with projections, groundbreaking was 19 percent above the August 2012 rate of 749,000.
The same report showed privately-owned housing units authorized by building permits reached 918,000 in August, a drop of 3.8 percent over the previous month’s revised rate of 954,000. However, building permits were almost 2 percent higher than the August 2012 estimate of 827,000.
The drop in housing starts—specifically, multi-family units—is likely the result of rising mortgage rates, leading developers to pull back from multi-unit projects. Mortgage rates have spiked as the markets anticipate a reduction of the Federal Reserve’s open market operation, currently valued at $85 billion per month. According to Bernanke’s post-FOMC announcement, the Fed will hold off on tapering for at least another month.
Economists and other market participants are convinced a taper is likely to happen sometime this year; they only differ on the pace and exact timing of the Fed’s plan. Since 2009, the Federal Reserve has pumped more than $3.6 trillion into the US economy in an effort to boost employment and overall growth.
In related news, the National Association of Home Builders/Wells Fargo Housing Market Index was unchanged in September with a reading of 58. The Housing Market Index measures home builder expectations concerning future home sales and expected building projects. Despite the flat reading, builder confidence remains at its highest level in nearly eight years, the report concluded.
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