This morning’s release of US Census residential construction numbers for August came in mixed. Total housing starts reported a 9.2% MoM increase at a seasonally-adjusted annualized rate of 1.282 million, beating the estimate of 1.238 million. Permits, on the other hand, came in far worse. Estimates were for a seasonally-adjusted annualized rate of 1.31 million, but the actual level came in lower at only 1.229 million, a 5.68% MoM decrease. Units under construction and completed both saw month-over-month increases of 0.8% and 2.54%, respectively.
While starts did come in higher overall, a large portion of the gain can be attributed to growth in the West, up double digits for both single and multifamily homes on a MoM basis. That follows an extremely low starts rate in recent months relative to recent permit activity. Conversely, the Northeast is the biggest laggard, especially when it comes to completions and permits. Single family permits, single family starts, total completions, and single family conversions are all down double-digits YoY. While starts, units under construction, and completions have generally been pretty strong around the country, permits have fallen off a cliff. In aggregate, permits are down 5.5% YoY with single family permits only barely clinging to YoY growth.
While the numbers from this report tend to fluctuate, the annual rate for total housing permits are at their lowest point since May 2017. Given that permits are generally more reliable than starts, that’s not a good sign, though it ought to be balanced against the fact that the number of units under construction is at a record level, suggesting that permits are slowing because of supply constraints rather than soft demand.