August housing starts exceed expectations

19 September, 2018

Scott Volling
Partner, PwC US

Housing starts for August exceeded expectations by 3.8%, coming in at 1,282,000, while results for permits came in below expectations at 1,229,000, 6.5% below consensus. Starts improved 9.2% compared to July, but this is a bit misleading given the surprisingly low July number of 1,168,000. August starts were driven by the volatile multi-family segment, increasing 37% year over year to 392,000 units. By comparison, single family starts were essentially flat compared to last year, dropping 2,000 to 876,000 units.

After several lackluster months, the headline number for August starts is strong. However, breaking down the number further shows the entire year over year gain can be attributed to multi-family, while single family actually decreased year over year. This continues an overall disappointing three-month trend in starts. Permits in June and July provided a bit of a promising silver lining, but in August permits came in at the lowest levels since May 2017. With mortgage rates at a 7 year high, homebuilder sentiment trending lower, and an increased threat of tariffs further pressuring existing affordability challenges, the ho-hum results of August could very well be the norm for the foreseeable future.