Housing starts stronger than expected; largely due to multifamily starts

Housing starts were stronger than expected, rising 4.3% in August to 589,000. However, the gain was largely in the volatile multi-family starts series, which jumped 32.2% in August. Single-family starts rose 4.3% in the month.

Building permits were also above forecasts, rising 1.8% to 569,000 in August. As with housing starts, the increase was driving by the multi-family sector as these permits rose 9.8% in August, while single-family permits declined by 1.2%.

BOTTOM LINE

Gains in residential construction in August were driven by sharp increases in multi-family starts and permits, a sector where activity is highly volatile from month-to-month. Given the supply of homes for sale, elevated housing vacancies, and weak homebuilder confidence, we do not expect housing construction to be a source of growth in the foreseeable future. However, with levels of activity in this sector so low, residential construction is unlikely to provide any significant drag on the economy.

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