US housing starts increased more than expected to a three-month high in August, driven largely by a surge in multi-family homebuilding. However, building permits surprisingly experienced their largest drop since February 2017, suggesting that homebuilding is having difficulty stabilizing in 2018.
Housing Starts, Permits & Completions
After inching up just 0.9 percent in July, US housing starts rebounded and increased 9.4 percent in August to a seasonally adjusted annual rate (SAAR) of 1,282,000 units. The Commerce Department raised its estimate for starts in July to a 1.174 million-unit rate.
Single-family starts accounted for 876,000 units, which is 1.9 percent above the revised July figure of 860,000, and starts for the volatile multi-family housing segment surged 29.3 percent to a rate of 406,000 units in August. However, privately-owned housing authorizations were down 5.7 percent to a rate of 1,229,000 units in August. Single-family authorizations decreased to 820,000, which is 6.1 percent below the revised July figure.
Privately-owned housing completions were up 2.5 percent to a SAAR of 1,183,000 units in August. Regional performance was largely mixed as confirmed by the US Census Bureau report, although the US West drove most of the growth after a lackluster performance a month prior. Seasonally-adjusted total housing starts by region included:
- Northeast: 0.0 percent (-4.0 percent last month)
- South: +6.5 percent (+10.4 percent last month)
- Midwest: +9.1 percent (+11.6 percent last month)
- West: +19.1 percent (-19.6 percent last month)
Seasonally-adjusted single-family housing starts by region included:
- Northeast: -10.4 percent (-5.7 percent last month)
- South: +3.0 percent (+2.0 percent last month)
- Midwest: -14.0 percent (+22.3 percent last month)
- West: +14.2 percent (-10.0 percent last month)
The 30-year fixed mortgage rate increased from 4.53 to 4.55 percent in August, and the National Association of Home Builders (NAHB)/Wells Fargo builder sentiment index was unchanged at 67 in early September.
Bloomberg summed up the conflicting markers by noting that “The data show persistent crosswinds for housing. While starts recovered after two straight declines, homebuilding permits signaled weakness in coming months. The decline in authorizations was broad-based with the single-family segment dropping 6.1 percent, the most in seven years, and multifamily permits falling 4.9 percent for a fifth-consecutive decrease.”
Existing Home Sale Prices Continue to Increase
After faltering in recent months, existing home sales were reasonably steady in August per the latest report from the National Association of Realtors (NAR). Total existing home sales were at a seasonally adjusted rate of 5.34 million units in August—1.5 percent below August 2017's rate. NAR Chief Economist Lawrence Yun said that the decline in existing home sales seen in previous months appears to have tapered based on new regional sales data.
“Strong gains in the Northeast and a moderate uptick in the Midwest helped to balance out any losses in the South and West, halting months of downward momentum,” Yun said. “With inventory stabilizing and modestly rising, buyers appear ready to step back into the market.”
The median existing home price for all housing types increased to $264,800, up 4.6 percent from August 2017 and the 78th straight month of year-over-year gains. Total available, existing housing for sale was at 1.92 million units at the end of August—up from last year’s total of 1.87 million. Unsold inventory in August was at a 4.3-month supply, which is up from 4.1 months a year earlier.
Other data from the report include:
- Properties were on the market an average of 29 days in August, up from 27 days in July. Fifty-two percent of homes were on the market for less than a month.
- First-time buyers were 31 percent of sales in August, which is a decrease from 32 percent in July. The annual share of first-time buyers stands at 34 percent.
Regional existing home sales data for August include:
- Northeast: sales climbed 7.6 percent to an annual rate of 710,000 in August—down 2.7 percent from a year ago. The median price increased 2.6 percent to $292,800 compared to August 2017.
- Midwest: sales rose 2.4 percent to an annual rate of 1.28 million in August—0.8 percent below August 2017. The median price increased 3.4 percent to $208,500 compared to August 2017.
- South: sales inched up 0.4 percent to an annual rate of 2.23 million in August—up 1.8 percent from a year ago. The median price increased 3.2 percent to $227,900 compared to August 2017.
- West: sales dropped 5.9 percent to an annual rate of 1.12 million in August, which is 7.4 percent below August 2017. The median price increased 4.8percent to $392,900 compared to August 2017.
As we noted in June, there is significant data suggesting that housing supply has failed to keep pace with population growth. “Rising interest rates along with high home prices and lack of inventory continues to push entry-level and first-time home buyers out of the market,” Yun added. “Realtors continue to report that the demand is there – that current renters want to become homeowners – but there simply are not enough properties available in their price range.”
The demand is translating to good news for current homeowners, as existing home values continue to appreciate on a YoY basis. A recent report by data analytics provider CoreLogic showed that home equity increased 12.3 percent in the second quarter of 2018; the average homeowner saw their equity increase by roughly $16,200 in twelve months.
While home equity grew in almost every state, western states experienced the most significant gains. California homeowners gained an average of approximately $48,800 in home equity, and Washington homeowners experienced an average increase of approximately $41,100 in home equity between 2Q2017 and 2Q2018.