By Geoffrey Smith
Investing.com — The number of permits issued to build new homes fell in August as rising construction and borrowing costs moderated demand, but housing starts still posted their biggest monthly gain in more than a year.
Construction licenses fell 10% from July to 1.517 billion, its lowest level in two years. Despite this, housing begins surprisingly it bounced more than 12% to 1.575 million, comfortably beating expectations for a figure roughly unchanged from July.
The rebound in housing starts is a notable outlier for other recent housing market data, which almost without exception has shown the sector cooling rapidly under the weight of successive interest rate hikes by the Federal Reserve and the end of the pandemic that triggered a rush for larger single-family homes with more space to accommodate remote work practices.
Nancy Vanden Houten, an analyst at Oxford Economics, noted that this softening trend is likely to be reaffirmed in the coming months.
“We look for housing to begin to soften from the August pace,” Vanden Houten said in a note to clients. “While housing shortages continue to persist, more cautious homebuilders are expected to slow the pace of construction in response to higher interest rates and a slowing economy.”
The rebound in housing starts was mainly in multi-family units, which usually represent cheaper and smaller living spaces. They rose to 621,000, their highest since 1986. In contrast, single-family home starts rose a more modest 3.4% to 934,000, well below the average of recent months by more than a million
The numbers come a day after the National Association of Home Builders reported a ninth straight drop in confidence in the industry in its September monthly survey.
“Buyer traffic is weak in many markets as more consumers are kept on the sidelines by high mortgage rates and house prices that are putting buying a new home out of financial reach for in many homes,” NAHB President Jerry Konter said in a statement.
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The Mortgage Bankers Association said last week that its benchmark rate for 30-year home loans had topped 6% for the first time since before the Great Financial Crisis of 2008. meanwhile, annual home price inflation has topped 18% over the past 12 months, according to S&P Global (NYSE:SPGI) monthly assessments.
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