US housing starts and building permits grow in August

US housing starts and building permits both grew last month, driven by a surge in the Northeast region.

Housing starts were up 3.9% in August to a seasonally adjusted annual rate of 1.61m units, according to the Census Bureau, bouncing back from a downwardly revised 6.2% drop in July and beating market expectations for a print of 1.55m.

Starts of buildings with five units or more jumped 21.6% to 530,000, while the single-family segment dropped 2.8% to 1.07m.

Starts surged 167.2% in the Northeast to the highest level since January, while starts were up 11.4% in the Midwest and 1.4% in the South. Going the other way, starts declined 21.1% in the West.

Building permits were up 6% month-on-month at 1.72m, ahead of forecasts for a reading of 1.60m.

Pantheon Macroeconomics' Ian Shepherdson said: "The headlines look very strong but both were boosted by big increases in the volatile multi-family component, in the Northeast for starts and in the Northeast and South for permits. By contrast, core single-family starts dipped by 2.8%, while permits rose 0.6%. The trends in both are falling, in response to the steep drop in new home sales over the first half of the year. That said, single-family starts are running a bit higher than is implied by the trend in new home sales, likely because inventory remains very low so developers are still trying to catch-up.

"Over the next few months, though, we have to expect single-family starts to drift lower, returning—like new home sales—to their pre-Covid level. The flight to the burbs which triggered the boom in home sales, prices, and construction activity is over, though mortgage demand has nudged back up in the past two months. The Delta wave might be triggering a renewed, but much smaller, burst of demand in the burbs."