Housing Market Roller Coaster Continues As New Construction Plunges

The pace of new construction in the US plunged in August, data released on Tuesday showed.

Housing starts dropped more than 11% last month, according to the government figures.

The 1.283 million pace missed consensus by a country mile and came in well below the lowest estimate from the five-dozen alleged experts who ventured a guess. The range of estimates was 1.375 million to 1.478 million.

August’s pace was the slowest since June of 2020, and marked the second month in three during which starts fell double-digits.

Rates rose sharply last month amid a selloff at the long-end of the Treasury curve. Builder sentiment fell a second month in September data released on Monday suggested.

Although single-family starts did fall in August, multi-family construction was the culprit for the big slowdown. Multifamily starts dropped 26.3% from July, and 41% YoY.

The data’s volatile. Charting the MoM change in the multifamily series is pointless.

Permits, meanwhile, topped estimates. The rate there was 1.543 million, the quickest in 10 months and well ahead of the 1.44 million consensus.

Single-family permits rose 2% to a 949,000 pace. That was the fastest since May of 2022.

Note that the single-family permits series is up every month since January. Single-family completions were the lowest since the beginning of last year.

The message from Tuesday’s figures was fairly straightforward: Affordability is biting new construction, but the country’s structural housing shortage (which is, of course, a contributing factor to the affordability crunch) continues to support the outlook for single-family demand, hence the ongoing rebound in applications to build.

Permits rose in every region. The geographic breakdown for single-family starts was telling: New construction rose more than 8% in the “affordable” South and plummeted nearly 27% in the (still) unaffordable West.

Finally, if you’re inclined to suggest the annotations in the final figure shown above are indicative of economic mismanagement by various government agencies, including the Fed, you’re not wrong. Or not entirely wrong, anyway.