Home builders pause in August from torrid pace.

By Manuel Gutierrez, Consulting Economist to NKB

Following several months of steady gains in new housing construction, home builders took a breather in August.
Housing starts fell by 5.1% to an annualized rate of 1.42 million units after three months of gains, still far above the April pandemic low of 934,000. A one-month decline is too brief to discern a pattern, and is often reflective of a falloff in the multifamily portion of the equation. That was the case for August, as multifamily units plunged by 23% while single family continued their climb, up 4.1%.

In fact, the current annualized pace of 1.42 million units exceeds the 1.29 million for 2019, a year of steady growth, as illustrated by the chart below.

Examining housing starts regionally in August, there were wide variations in how each of the four performed. Builders in the Midwest and West had far more housing starts than they did the previous month. The Midwest  was up a substantial 28%, to an annual rate of 267,000 units. The gain in the West, although not quite as strong, was still sizable, growing 20% to 361,000 units.

The other two regions experienced declines. Starts in the Northeast were off by 22%, but as the smallest region for new housing starts, its 89,000 units represented just 6% of the U.S. total. In contrast, housing starts for the South, the largest region in terms of new construction, fell by 18% for the month to an annualized rate of 699,000. The South typically generates more than half the nation’s new housing construction.

Although housing starts fell last month, year-to-date through August saw them at their highest levels since 2007. In a year-to-year comparison through August, 5.2% more houses have been started this year, for a total of 894,000 new homes.

By type of construction, a total of 618,000 single-family homes have been started so far this year, up 4% from the same period last year. Construction of multifamily housing has reached 276,000 units, or 8% above 2019.

The table below shows that year-to-date construction in three of the four regions has improved compared with 2019. The exception is the Northeast region, where total housing starts are down 4.5% from last year, driven by a drop in construction of both single-family and multifamily houses.