U.S. housing starts rose to 598K in August, and now stand at their highest level in nine months.
- Permit approvals were also higher on the month,rising 2.7% M/M to 579K.
- This is further evidence that the long beleaguered housing sector is slowly recovering.
U.S. new residential construction rose to its highest level since November last year, with a 1.5% M/M gain to 598K. This was in line with the market consensus and brings the level of construction activity well above the bottom of 479K units built in April. The increase in construction, however, was all in the volatile multi-family unit component, which rose a dramatic 25.3% M/M to 119K from 95K in July. The more stable single-family unit component declined a modest 3.0% M/M to 479K. The trend in new residential construction was also encouraging, rising to 592K units from 577K units. Even so, housing starts remain 74% below their historic peak of 2.3 million units built in January 2006. The prospect for future construction activity was also quite favourable, as permit approvals rose a further 2.7% M/M to 579K in August. Here again, the increase was all in multi-family units, which rose 15.8% M/M to 117K units, while single-family permits were more or less unchanged at 462K. On the whole, the report underscores the growing optimism about the U.S. housing market, and suggests that
home building activity is continuing to rise beyond the cyclical low formed only a few months ago. Moreover, even though the pace of recovery in the sector remains very slow, it does appear that residential construction could add favourably to U.S. economic activity in Q3, which is in stark contrast to the significant drag it created for GDP only a few months ago.