Figures from the Commerce Department show that housing starts for multifamily homes fell in August, but the number of permits to build single-family homes increased substantially. Overall housing starts increased by a seasonally adjusted rate of 0.9%, reaching 891,000 units.
According to the article in AOL.com, this figure is less than had been predicted by economists, who expected the rate to rise to 917,000 units in August. Housing starts for single-family homes account for the largest segment of the market, and these increased by 7% to reach 628,000 units. By comparison housing starts for multifamily homes decreased by 11.1%, accounting for just 263,000 units last month.
The figures for single-family homes reached their highest level since February, and suggest that the housing market recovery is sustainable. In comparison the drop in the number of multifamily housing is being attributed to the fact that mortgage rates are rising, and this is making developers slightly more cautious about new projects. However applications for home loans increased slightly last week due to a slight easing in mortgage rates.
While it’s true that the increase in mortgage rates has slowed down the rate of home sales, demand for accommodation is still high. Mortgage rates have been kept low in the past due to the Federal Reserve buying $85 billion in bonds each month, but have recently risen in anticipation of this figure being reduced.
Last month permits to build homes decreased to 918,000 units, a drop of 3.8% whereas economists had predicted a figure of 950,000. Permits are a good future indicator of housing starts, as they usually precede them by at least a month. Last month’s fall was largely due to decreasing demand from the multifamily sector, as the number of permits fell by 15.7% whereas permits for single-family homes increased by 3%. This means permits for single-family homes hit their highest level for more than five years. In these figures are backed up by a recent survey of single-family home-builders which showed the confidence levels for this month are nearly at an eight year high.
The sustained recovery in residential construction should help the economy. Even though new home construction accounts for just 3.1% of gross domestic product, it is estimated that each new home keeps three people employed for a year.