The housing starts and building permits report can be very volatile and the August report confirms the reputation. Starts jumped 9.2 percent to a 1.282 million annualized rate which well exceeds Econoday's high estimate and is well above July's upwardly revised 1.174 million rate. But permits, which are the forward looking component of the report, fell 5.7 percent to a 1.229 million rate and is well below Econoday's low estimate.
Looking first at starts, multi-family units, which have been weak, surged 29 percent to a 406,000 rate for year-on-year growth, which had been in the negative column, of plus 38 percent. Single-family homes, which are the more important of the readings, rose 1.9 percent to an 876,000 rate that, however, is fractionally lower than a year ago, down 0.2 percent.
The year-on-year rate for total permits is down 5.5 percent as multi-family units, in contrast to starts, are down 17.7 percent. Permits for single-family homes fell 6.1 percent in the month with this yearly rate in the plus column at 2.1 percent.
Completions are a positive for single-family homes in a housing market starved of supply, up 11.6 percent in the month to a 923,000 rate. Multi-family completions are down 18.5 percent to 290,000.
Today's report is definitely a mixed bag but the gain for completions and the surge in multi-family starts are positives. Yet the general decline in permits is a prominent negative that underscores this year's downtrend for housing which is tied, not only to soft demand for housing, but also to capacity constraints in housing where lack of available labor and high material costs are blunting the ambitions of home builders.
Bounce-back strength for housing starts and extending strength for building permits are the expectations for August, at a 1.240 million annualized rate for starts, compared to 1.168 million in July, and at 1.315 million for permits vs July's 1.303 million (revised from an initial 1.311 million). This report had been solid before showing striking slowing, especially in starts, in both June and July.