September 20, 2005 - The pace of new-home construction edged down slightly in August but remained at a seasonally adjusted annual rate above 2 million units for the fifth month in a row, according to government figures released today. The Commerce Department indicated that the effect of Hurricane Katrina on the August housing report was “minimal.”
Total housing starts dipped 1.3 percent for the month to a seasonally adjusted annual rate of 2.009 million units, following a downward revision to the July rate. This was 0.8 percent below the pace of a year ago.
The pace of single-family home construction edged up a slight 0.1 percent to 1.709 million units for the month. This was 1.2 percent above the pace of a year ago.
“While still working hard to keep up with demand, builders had begun to see a bit of a plateau in buyer activity,” said Dave Wilson, president of the National Association of home Builders (NAHB) and a custom Home Builder from Ketchum, Idaho. “NAHB’s single-family Housing Market Index, released yesterday, indicates a gradual erosion of builder confidence from a recent high in June.”
“The housing market still is in very good shape, although a modest cooling may now be underway,” said NAHB Chief Economist David Seiders. “Our surveys of builders show growing buyer resistance to elevated house prices in many areas, and anticipated increases in interest rates have tempered the housing outlook to some degree.”
Multifamily housing starts were down 8.5 percent for the month to a seasonally adjusted annual pace of 300,000 units. This was 10.7 percent below the pace of a year ago.
Housing starts increased in the West by 13.3 percent, but the three other regions reported declines in new construction activity in August. Total starts in the Northeast dipped 4.1 percent, the Midwest was down 5.2 percent and the South, which had unusually wet weather prior to Katrina, decreased by 6.6 percent.
Issuance of total building permits decreased 2.2 percent to a seasonably adjusted rate of 2.124 million units for the month. Single-family permit issuance dipped 1.3 percent and multifamily permit issuance was down 5.5 percent.
Permits were down in three regions of the country but increased by 4.2 percent in the South. Seiders noted that the increase, combined with the sizeable decline in housing starts for the region, generated a considerable backlog of unused permits in the South. “Many of these permits will translate into housing starts in the South in the coming months, although the average time lag is likely to be unusually long,” Seiders said.