Housing Starts and Sales Remain Strong

According to data released in mid-September by the U.S. Department of Housing and Urban Development and the U.S. Department of Commerce, total housing starts increased 9.2 percent in August, to a seasonally adjusted rate of 1.28 million. Single-family starts increased 1.9 percent to 876,000; and multifamily (apartment buildings and condos) starts increased 29.3 percent to 408,000.

“Builders remain largely confident because the economy is solid and demographics point to continued demand,” said Randy Noel, chairman of the National Association of Home Builders (NAHB), in response to the government report. “However, affordability continues to be a concern for both builders and buyers.”

“Although we saw an increase in starts in August, we are likely to see a softening in the market in the months ahead,” said Robert Dietz, chief economist for the NAHB. “Affordability is a particular concern, because of home price gains, due in part to the higher regulatory burden on new home construction. Increasing costs for building materials prompted partially by the recently imposed tariffs on a wide range of products are also a concern. Moreover, interest rates are continuing their gradual upward climb.”

However, other data released by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau a week later found new home sales were continuing to rise despite on-going affordability concerns. The rate of increase was 3.5 percent in August over July. The agencies also reported that, on a year-to-date basis, sales are up 6.9 percent from this same time in 2017.

“New home sales ticked up in August due to positive demographics and a strong overall economy,” said Noel in response to the new government data. “However, housing affordability remains a serious concern, and builders must manage supply-side costs and stiff regulatory hurdles to keep prices competitive.”

“We expect the overall housing market to grow this year as demand continues to increase among millennials and other newcomers,” Dietz said.

Regionally, new home sales rose 47.8 percent in the Northeast, 9.1 percent in the West, and 2.7 percent in the Midwest, but they fell 1.7 percent in the South.