Permits to build new homes fell sharply in August even while the pace of new construction unexpectedly picked up, according to Census Bureau data released Tuesday.
Permits dropped nearly 10 percent in August from July to a seasonally adjusted annualized rate of 1.517 million after holding steady in the prior two months. The decline illustrates how residential construction is coming under pressure from higher interest rates.
Housing starts, a measure of newly begun housing construction, unexpectedly climbed to 1.575 million, 12.1 percent above the revised July level of 1.404 million. Economists had projected starts to be at a 1.440 million annualized pace, which would have been a dip from the 1.446 million pace initially reported for July.
Starts may have seen a boost from the short-lived decline in mortgage rates in August. The average rate on the 30-year fixed mortgage dropped to 5.22 percent in August from 5.41 percent in July and 5.52 percent in June. They recently have climbed above six percent for the first time since 2008.
On Monday, a trade group for the residential construction industry said homebuilder sentiment declined for a ninth straight month in September. This is the longest stretch of month-to-month declines on record.
“It’s a real bad time, nine straight months down. We’ve given birth to a housing recession,” National Association of Home Builders chief Jerry Howard told Fox Business Network yesterday.
Single-family housing starts rose 3.4 percent to a rate of 935,000. Multi-family construction jumped 28.6 percent to a rate of 621 million, a record high.
Multifamily construction tends to be a lagging indicator due to long lead times and somewhat counter-cyclical.