9/19/2007
R. J. Sheehan & Associates
The rate of housing construction starts fell to a 12-year low in August and single family starts dropped under the 1 million unit rate level for the first time since March of 1995, according to Robert Sheehan, consulting economist for the National Apartment Association.
“Turmoil in the financial markets in August was a major factor in the further decline in housing starts,” Sheehan said. “The question now becomes will the Federal Reserve ’s move to lower the Federal Funds rate by one-half percent end the downturn in new housing construction? And if yes, when? “Multifamily starts rose significantly in August as the rental housing market fundamentals continue to improve and demand increases from the problems in the homeownership markets.”
The housing starts rate for August was estimated at a 1.331 million unit seasonally adjusted annual rate, according to the U.S. Department of Commerce, down 2.6 percent from the revised 1.367 million unit rate for July. Single-family construction dropped 7.1 percent to a 988,000 unit rate from 1.063 million a month earlier. Apartment (units in structures with 5 or more units) jumped 16.5 percent to a 311,000 unit rate from 267,000 in July. Total multifamily construction starts were up 12.8 percent to a 343,000 unit rate in August from the 304,000 unit rate a month earlier.
Housing starts were mixed regionally. Starts increased 11.4 percent in the South to a 716,000 unit rate and 4.2 percent in the Midwest to a 248,000 unit rate. They plunged 37.7 percent in the Northeast to a 96,000 unit rate (lowest since January 1996) and 18.4 percent in the West to a 271,000 unit rate (lowest since February 1993). Both the Northeast and South contain a large number of high-cost housing markets that experienced sharp rises in home prices in the middle of this decade, Sheehan noted.
Building permit activity declined 5.8 percent to a 1.309 million unit annual rate in August from the 1.389 million revised rate for July. Single family permits declined 8.1 percent to a 926,000 unit rate from 1.008 million a month earlier. Total multifamily permits were issued at a 383,000 unit rate in August and were little changed from the 381,000 rate for July. Permits for apartments were issued a 324,000 unit rate in August and were virtually the same as the 323,000 unit rate for July.
Housing starts during the first eight months of this year were down 24.3percent to a total of 977,900 units from the 1.292 million units over the same period in 2006. Single-family starts were down 27 percent to 779,900 units from 1.068 million units a year earlier. Total multifamily starts declined 11.7 percent to 198,000 units from 224,300 units. Apartment construction in the first eight months of this year dropped 8.9 percent to 176,000 units from 193,300 a year ago.