The only U.S. economic data released this morning is a report from the U.S. Census Bureau which showed that privately-owned housing starts in August grew at a seasonally adjusted annual rate (SAAR) of 1.142 million units. That is a sharp 5.8 percent drop from July’s upward-revised print, much worse than economists had expected, and the largest sequential decline in five months. The weakness was broad in August, with single-family housing starts falling by 6.0 percent and multi-family units (rentals) decreasing by 6.9 percent. Regionally, total housing starts actually lifted everywhere except in the South (-14.8 percent), which was dragged down by a 13.1 percent plunge in single-family units. Total building permits, a popular gauge of future construction activity, also fell in August (-0.4 percent to 1.139 million units) but the decline was mitigated by a 3.7 percent gain in single-family permits. On a year-over-year basis, though, total authorizations have declined by 2.3 percent, and this longer-term loss of momentum has likely resulted from a combination of land supply scarcity, still relatively tight credit standards, and local delays in getting building permits approved. However, continued strength in the labor market (wage growth), accelerating Millennial household formation, and a slow pace of interest rate normalization from the Federal Reserve should all remain supportive of U.S. home construction.
Sources: Econoday, Twitter, Bloomberg, ZH, U.S. Census Bureau, FRBSLPost author: Charles Couch