Construction of new housing in the United States fell in August by the most since April 2013, the U.S. Commerce Department reported on Thursday, but economists caution not to read too much into the number by explaining the housing recovery appears to be continuing at a modest pace.
Housing starts dropped 14.4 percent to an annualized rate of 956,000, a steeper decline than the 5.6 percent economists were predicting. The report said 998,000 housing construction permits were issued last month, lower than the 1.04 million expected by industry watchers.
The construction of new housing is a key economic indicator that monitors Americans’ willingness to begin expensive residential projects. Declines can indicate the economy is weakening. In this case, analysts say the latest figures come after a robust spring rebound in construction following a harsh winter plunge -- that it's nothing to worry about.
"Housing starts had surged in July, driven in large part by the volatile multifamily sector,” Dean Maki, an economist at Barclay’s Research, wrote in an emailed analysis. "Because the housing starts data are volatile on a monthly basis, these data do not change our view that a moderate housing recovery remains on track.”
Incomes remain below levels prior to the 2007-09 recession, which has pushed up demand for rental properties amid a recovery that’s leaving millions of more Americans living paycheck to paycheck than prior to the housing market collapse. Last month, the Census Bureau said apartment construction hit a 25-year high in July. In June new home sales dropped 8.1 percent, indicating softer demand for new residential properties.
The Census Bureau also said this week that the country’s median income is $51,939, which is 8 percent lower than incomes in 2007 when adjusting for inflation. An analysis of economic data by the Russell Sage Foundation, a social science research organization, reported in June that only the top 10 percent of American households are wealthier now that they were a decade ago. Most Americans are poorer than they were in 2003 while the bottom 5 percent of households are nearly three times deeper in debt.