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August housing starts above expectations, highest level in over 12 years

18 September, 2019

Scott Volling
Partner, PwC US

August housing starts and permits were released today, with both numbers blowing away expectations. Starts came in at 1,364,000, 9.1% above the consensus of 1,250,000, 12.3% above last month’s upwardly revised 1,191,000 and 6.6% above a relatively solid 1,279,000 in August of last year. Permits also positively surprised, coming in at 1,419,000, 7.7% above last month’s upwardly revised 1,317,000 and 12% of the August 2018 result of 1,267,000.

With both starts and permits coming in at levels not seen in over 12 years, the strength of the numbers reflect the optimism that builders have in the market, which was also demonstrated through yesterday’s builder sentiment index reaching the highest levels of the year. Strong demand coupled with a still favorable interest rate environment should continue to drive solid monthly results. However, it will be worth watching if the housing market can continue to produce these results month over month or whether August will simply be an anomaly. The uncertainty of the trade war with China, a slight rise in interest rates this month, along with the continued challenges with the cost of land, labor and materials, may drive September’s results back to recent historical levels.