Privately-owned housing starts sank to a three-year low in August as prospective home buyers continued to sit on the sidelines watching mortgage rates that remain over 7%.
Privately-owned housing starts fell 11.3% to a seasonally-adjusted annual rate of 1.283 million in August when compared with the revised July estimate of 1.447 million, according to the Census Bureau's latest data. When compared with the year-ago period, housing starts were 14.8% below the August 2022 rate of 1.505 million.
Single-family starts, which account for most of homebuilding, declined 4.3% to a seasonally-adjusted annual rate of 941,000 in August when compared with July’s revised figure of 983,000. The August rate of starts for buildings with five or more units plunged 26.3% to 334,000 when compared with July’s rate of 453,000.
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Building permits rose 6.9%, however, to a seasonally-adjusted annual rate of 1.543 million when compared with the revised July rate of 1.443 million. But August’s figure declined 2.7% when compared with the August 2022 rate of 1.586 million.
Single-family housing units authorized by building permits also rose, by 2% to 949,000, compared with July’s revised figure of 930,000. Authorization of buildings with five units or more were at a rate of 535,000.
Market under pressure
The housing market has been under immense pressure as rapidly rising mortgage rates have led to mortgage demand sinking to its lowest levels since 1996, homebuilder sentiment hitting a five-month low, and credit availability sitting at very low levels.
Recent economic data indicates that the Federal Reserve could pause interest rate hikes for the rest of the year and possibly beginning to cut rates in 2024. However, Fed Chair Jerome Powell has been clear in his stance of wanting to make sure that the Fed does not cut rates too early as this would allow inflation to rebound.
The central bank’s rate-setting group is scheduled to meet on Sept. 19-20.
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