Housing Starts Rose in August

By:: Kirk Haverkamp | September 21, 2010

New housing construction starts rose 10.5 percent in August, exceeding economist’s projections and raising hopes the market may be coming back from last summer’s declines.

Housing construction starts were at a seasonally adjusted rate of 598,000 units in August, according to figures released this morning by the Commerce Department, up from a revised estimate of 541,000 in July. A pool of economists surveyed by Dow Jones Newswires had expected a rate of 545,000; a Bloomberg survey projected a rate of 550,000.

The figure represents a 2.2 percent annual increase over the August 2009 rate of 585,000.

The boost was driven by a sharp increase in construction of multiunit homes such as condominiums and apartment buildings; construction starts of residences of five or more units jumped 42.7 percent, to an annual rate of 147,000 units, up from 103,000 in July and the highest rate since February 2009.

The gain in construction starts of single-family homes, considered the backbone of the market, was more modest 4.3 percent, to an annual rate of 438,000 units, up from 420,000 in July, but still 9.1 percent below the August 2009 level of 482,000 units.

Although encouraging, both the overall and single-family increases for the month are within the survey’s margin of error, while the multiunit rate slightly exceeds it. The Commerce Department cautions that several months of results are needed to reliably identify trends and initial results are frequently adjusted in the following month’s report.

A less encouraging sign was that new construction permits for single-family homes declined in August for the fifth consecutive month, dropping 1.2 percent to an annual rate of 401,000 units, down from 406,000 in July and an annual decline of 16.8 percent from 482,000 in August 2009.

New permits for construction of multiunit homes of five or more units were up 11.9 percent for the month, to an annual rate of 150,000 units, up from 134,000 in July and a 38.9 percent annual gain from 108,000 in August 2009.

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