Privately-owned housing starts in August grew at a seasonally adjusted annual rate of 1.416 million units, according to new Census Bureau data. That was a 5.1 percent decline from July’s downward-revised reading but still up 2.8 percent compared to this same period last year. Further, all of the weakness was concentrated in the multi-family (rental) segment, while single-family starts actually rose by a solid 4.1 percent in August. This trend has likely continued into September because although building permits fell last month the decline was again driven by rental properties, and the single-family component instead jumped by 6.0 percent. Regional differences clearly exist as well, with single-family building authorizations in the South and the Midwest now higher compared to pre-pandemic levels, whereas permits out West and in the Northeast remain depressed.
One possible interpretation of this data is that a growing number of Americans are fleeing the areas of the country hit harder during the COVID-19 outbreak, but more favorable tax rates have likely also provided some motivation to move, as has the lockdown-induced work from home experiment that taught many people they may not need to live in population-dense mega cities. More generally, the housing market remains a bright spot of the U.S. economic recovery. Only a sudden surge in supply could derail the positive momentum, and encouragingly most of the support factors we outlined in April still hold true today. Homebuilders share such optimism, according to an updated report from the NAHB released this week. Specifically, the headline sentiment index surged to 83.0 in September, the highest reading on record and helped by marked improvements in builders’ assessments of prospective buyer traffic and both current and future sales conditions. The report’s authors added that “The suburban shift for home building is keeping builders busy, supported on the demand side by low interest rates. In another sign of this growing trend, builders in other parts of the country have reported receiving calls from customers in high-density markets asking about relocating.”
Sources: Econoday, U.S. DoC, NAHB, FRBSL