Housing starts fall more than forecast

U.S. home starts fell more than forecast in August, reflecting less construction of apartments and a decline in the tropical storm-hit South, representing a pause in momentum for a housing market that’s been a key source of fuel for the economy.

Residential starts decreased 5.1%, to a 1.42 million annualized rate from a month earlier, according to a government report released Thursday. The decline follows a downwardly revised 17.9% surge in the prior month. The median forecast in a Bloomberg survey called for a 1.49 million pace in August.

Applications to build, a proxy for future construction, decreased 0.9%, reflecting fewer permits for multifamily housing, following a 17.9% surge in July that was the largest in 12 years. The 1.47 million rate of permits was below the median estimate for 1.51 million though it remains above the February pre-pandemic rate.

The unexpected dip in building permits “barely dents the massive increases that were racked up over the past three months,” Jennifer Lee, senior economist at BMO Capital Markets, said in a note. “And note that the gap between starts and permits is positive again, pointing to more ground-building work (literally) ahead.”

An increase in starts of single-family housing and a stronger home-construction market than a year earlier are consistent with one of the best-performing areas of the economy. Firm demand, reflecting record-low interest rates and changing living preferences as a result of the pandemic, has propelled homebuilder sentiment to a record high.

Housing starts rose in two of four regions. In the South, new construction decreased, reflecting in part tropical storms along the Gulf Coast. A pickup in building permits in the region to the highest since February 2007, however, indicates homebuilding will firm in coming