WASHINGTON – U.S. single-family housing starts continued to edge higher in August, in what could be the last snapshot of the market's health before the cleanup from major hurricanes begins to skew construction activity.
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Overall housing starts slipped 0.8% in August from the prior month to a seasonally adjusted annual rate of 1.18 million, driven by continued steep declines in multifamily building, the Commerce Department said Tuesday.
Single-family starts, however, rose 1.6% in August, even as starts for buildings with two or more units and fell 6.5%.
The report offers a mixed picture of a market in which single-family construction is gradually improving while multifamily construction is declining significantly due to an oversupply of apartments in many urban markets.
Starts were up 2.7% in the first eight months of 2017 compared with the same period a year earlier. Permits rose 7.5% from the first eight months of 2016. The three-month moving average for single-family home starts was the highest since the recession.
U.S. median household income, adjusted for inflation, rose to a new record in 2016, surpassing the previous peak in 1999, the Census Bureau reported last week, as Americans enjoy a period of sustained income growth and economic prosperity.
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Despite those gains, new construction remains weak due to a shortage of labor, lack of available land and other factors.
"Almost every other item of investment, everything is up and recovered, but housing construction has not recovered," said Chris Rupkey, chief financial economist at MUFG Union Bank. "It's the missing piece of the puzzle."
Monthly data on housing starts tend to be volatile and imprecise; August's 0.8% loss came with a margin of error of 9.6 percentage points. The 5.7% rise for permits had a 2-point margin of error.
Residential building permits, which provide a less volatile read on the market, rebounded in August. Permits, which typically lead starts by a month or two, rose 5.7% to a 1.3 million annual rate last month.
Permits fell 1.5% for single-family houses but jumped 19.6% last month for apartment buildings and other multifamily buildings. Both starts and permits fell in July, but revisions in Tuesday's report showed the declines weren't as steep as earlier estimated.
Limited supply and fast-rising prices have squeezed many would-be home buyers this year, despite mortgage rates that moved lower during the spring and summer. In July, purchases of previously owned homes and newly built single-family homes both fell from the previous month.
August is likely to provide the last indication of the health of the housing market before storms in Florida and Texas weigh on the data. The Commerce Department on Tuesday said hurricane-affected counties in Florida and Texas accounted for about 13% of total U.S. building permits last year.
"This is a good time to do a status check on the market and generally speaking single-family construction continues its gradual improvement," said Robert Dietz, chief economist at the National Association of Home Builders.
Hurricane Harvey hit the Gulf Coast in late August, followed by Hurricane Irma striking Florida earlier this month. The storms have started to scramble U.S. economic indicators, pushing up jobless claims in recent weeks and depressing industrial production during August, and home-construction data could be clouded for several months.
Granger MacDonald, chairman of the National Association of Home Builders, on Monday said builder confidence dimmed this month as "recent hurricanes have intensified our members' concerns about the availability of labor and the cost of building materials."
New-home construction has ground to a crawl in the weeks after the storm in affected areas of Texas and Florida, but should begin to pick back up as the rebuilding commences.
In Texas, repairing damaged homes is likely to strain an already tight labor market, dampening construction activity. But rebuilding new homes could eventually boost home starts. Houston builders were on track to build about 30,000 homes this year -- about as many as were destroyed in the storm.
"There's a pause and a reset going on in Houston, but I think in a few months we'll see things return to normal," said Scott Norman, executive director of the Texas Association of Builders.
Economic forecasters expect the storms will cause weaker growth in the short run, but activity should pick up in subsequent quarters as rebuilding efforts gain traction.
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(END) Dow Jones Newswires
September 19, 2017 12:24 ET (16:24 GMT)