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US housing starts, building permits tumble more than forecast in August

H.S. Borji
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US housing starts, building permits tumble more than forecast in August

US housing starts and building permits moderated more than expected in August, tempering expectations for a broad pick-up in residential real estate activity.

Groundbreaking for new homes declined 14.4 percent in August to a seasonally adjusted annual rate of 956,000, following a downwardly revised gain of 1.117 million the previous month, the Commerce Department reported today in Washington. Economists forecast housing starts to decline to 1.04 million.
Compared to August 2013, housing starts were up 8 percent.

Starts for single-family homes, which represent the largest segment of the market, declined 2.4 percent to 643,000.

Privately-owned housing completions rose in August, advancing 3.2 percent to a seasonally adjusted annual rate 892,000. Year-on-year, completions in this category were up 16.9 percent.

Groundbreaking declined in all four US regions last month, led by a 24.7 percent drop in the West that was the largest since November 2012.

Building permits – a gauge of residential building intentions – declined 5.6 percent in August to a seasonally adjusted annual pace of 998,000, following a revised 1.057 million pace the previous month. Economists forecast a fall to 1.045 million.
Single-family authorizations declined 0.8 percent to a seasonally adjusted annual rate of 626,000.

The housing recovery has shown signs of life in recent months, as construction activity, builder confidence and previously-owned home sales have risen.

On Wednesday the National Association of Home Builders said builder confidence in September reached its highest level since November 2005, as buyer interest and traffic picked up considerably. NAHB’s gauge of builder confidence increased four points to 59, exceeding forecasts.

All three of the index’s main components – current sales, future sales expectations and buyer traffic – increased this month. Confidence was up across all regions, led by a five-point advance in the Midwest.

Slow wage growth, tighter lending restrictions and higher home costs have all contributed to the broad slowdown in housing activity, which began last year with a spike in mortgage rates. The US economy has witnessed a surge in employment growth this year, but this hasn’t been enough to lift earnings growth, which is trending well below the long-run average.

According to the Labor Department’s August employment report, the jobless rate is 6.1 percent. Average earnings, meanwhile, grew only 0.2 percent. Year-on-year, this translated into a gain of 2.1 percent.

The Labor Department reported even more tightening in the labour market today, as jobless claims declined 36,000 to 280,000 in the week ended September 13.

Next week the National Association of Realtors will report on previously-owned home sales for the month of August. The sale of existing single-family homes increased 2.4 percent to a seasonally adjusted annual rate of 5.15 million in July, the NAR reported last month.

The Commerce Department will complete the picture on the housing market next Wednesday with a report on new home sales. New US home sales declined 2.4 percent to 412,000 in July, official data showed, as affordability concerns kept buyers out of the more expensive new residential housing market.

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