Signs of (slow) recovery: New home construction edges up in September
Home building in the United States edged higher in September amid signs that higher mortgage interest rates were keeping buyers on the sidelines, government data released Wednesday showed.
Construction starts on new homes rose 0.9 percent to an annual rate of 891,000 in August, after a downwardly revised July pace of 883,000, the Commerce Department said.
The July figure was initially estimated at 896,000.
The August pace of housing starts was well below the 910,000 expected by analysts.
Multi-family housing construction, a sector subject to volatility, braked home building last month.
Starts on multi-family homes, with five or more units, plunged 9.4 percent from July.
Starts on single-family homes, which make up the bulk of the US housing market, rose 7.0 percent.
August housing starts were up 19.0 percent from a year ago as the housing market recovers from the price bubble collapse in 2006.
Building permits — an indicator of potential residential construction growth — declined more than expected, to a rate of 918,000 after an upwardly revised July rate 954,000. They were up 11.0 percent from the August 2012 level.
“The trend in single-family starts this year has been broadly flat, in sharp contrast to the big gains of 2012, and permits have leveled off, too,” said Ian Shepherdson of Pantheon Macroeconomics.
“Some of this presumably reflects a slowing in demand in the wake of the spike in rates but we also think homebuilders are trying to hold down inventory to keep prices rising.”
According to a homebuilder survey released Tuesday, confidence in the market for newly built, single-family homes held steady in September at the highest level in nearly eight years.
The National Association of Home Builders composite index was unchanged at 58 in September, after four months of solid gains.
But home builders reported some buyers’ hesitancy due to the sharp increase in mortgage interest rates in recent months, NAHB said.
While still near historic lows, mortgage rates have jumped since the Federal Reserve signaled in May that it planned to reduce its asset-purchase program from $85 billion a month this year.
The average 30-year mortgage rate was 4.46 percent in August, up from 3.54 percent in May.
“Following a solid run-up in builder confidence over the past year, we are seeing a pause in the momentum as consumers wait to see where interest rates settle and as the headwinds of tight credit, shrinking supplies of lots for development and increasing labor costs continue,” said NAHB’s chief economist, David Crowe.