September 19, 2023 | 09:19
Housing Starts Plunge In August
The housing market slump continued in August with home starts plunging 11.3% to the lowest level since June 2020. High mortgage rates – the popular 30-year fixed rate averaged 7.07% last month, the highest since December 2001 – and low affordability are the primary reasons for the sharp drop in starts. The decline was broad based with multifamily starts plummeting 26.3% and single family starts dropping a much more modest 4.3%, nearly offsetting the 5.7% advance in July. The larger-than-expected monthly decline pushed the year ago growth rate down to -14.8%, the steepest annual decline since April.
On a more positive note, building permits, a proxy for future home construction, rose 6.9% in August, a sharp acceleration from the 0.1% gain in July. The volatile multifamily segment led the way with a strong 15.8% advance while single family permits climbed a comparatively more moderate 2.0%. Despite the solid month increase, building permits are 2.7% lower than a year ago and have declined annually for the last 13 months.
Bottom line: The long stretch of housing market weakness is likely to continue over the near term amid high mortgage rates and challenging affordability that are limiting home demand.