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Home Starts Dip Slightly as High Prices Turn Off Buyers
Noting a “minimal” impact from Hurricane Katrina, a Sept. 20 report from the Commerce Department indicated that the pace of new-home construction edged down slightly in August but remained at a seasonally adjusted annual rate above 2 million units for the fifth consecutive month.
Total housing starts dipped 1.3% last month to a seasonally adjusted annual rate of 2.009 million units, following a downward revision to the July rate, leaving production just 0.8% below the pace of a year earlier.
The pace of single-family home construction edged up a slight 0.1% to 1.709 million units in August, which was 1.2% above the year-earlier rate.
“While still working hard to keep up with demand, builders have begun to see a bit of a plateau in buyer activity,” said NAHB President Dave Wilson. “NAHB’s single-family Housing Market Index for September showed that builder confidence continues to erode gradually from a recent high in June.”
“The housing market still is in very good shape, although a modest cooling may now be underway,” said NAHB Chief Economist David Seiders. “Our surveys of builders show growing buyer resistance to elevated house prices in many areas, and anticipated increases in interest rates have tempered the housing outlook to some degree.”
Multifamily housing starts were down 8.5% for the month to a seasonally adjusted annual pace of 300,000 units. This was 10.7% below the pace of a year earlier.
Housing starts increased in the West by 13.3%, but they were down 6.6% in the South, which had experienced unusually wet weather in August prior to Katrina; 5.2% in the Midwest and 4.1% in the Northeast.
Issuance of total building permits last month decreased 2.2% to a seasonably adjusted annual rate of 2.124 million units, with single-family permits dipping 1.3% and multifamily permits down 5.5%.
Permits were down in three regions of the country but increased by 4.2% in the South. Seiders noted that the increase, combined with the sizeable decline in housing starts for the region, has generated a considerable backlog of unused permits in the South. “Many of these permits will translate into housing starts in the South in the coming months, although the average time lag is likely to be unusually long,” he said.
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See what's on the horizon for the housing industry at the semi-annual gathering of the country's premier economists and finance experts. Get the latest forecasts on housing starts, projected budgets and other economic bellwethers at the Fall Construction Forecast Conference on Oct. 19 at the National Housing Center in Washington, D.C. Visit www.nahb.org/conference for more information.
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