August Housing Starts: A Slight Step Back

• August housing starts fell 5.1% from July, to 1.416M (SAAR), but were up 2.8% from a year ago, according to the Census Bureau.
• Building permits fell 0.9% from July and 0.1% from August 2019, to 1.47M (SAAR). Single-family building permits rose 6% month-over-month, to 1.036M.
• Housing completions fell 7.5% from July and 2.4% from a year ago.

After a months-long stretch of unexpected -- and, at times, unbelievable -- strength, new home construction activity took a slight step back in August as a series of longstanding obstacles finally caught up to builders. The price of lumber and other key materials has become extremely volatile in the face of high demand and uncertain supply, and buildable lots in good locations are in as short supply as ever. Roughly flat permitting activity shows that builders' intent is there and that they recognize the need for their products, but a stepback in starts was probably inevitable in the face of these hurdles. Still, builder confidence hit an all-time high in August and has only improved since then. The housing market has shown remarkable resilience through the pandemic, and in many regards, the new homes sector has led the charge. A shortage of available for-sale existing homes, still-low mortgage rates and a possible and likely shift in preference toward new, never lived-in homes are all combining to drive business to home builders, and this will likely continue well into the fall. The torrid pace set in the spring and summer was maybe never sustainable, but 2020 should still shape up to be an unexpectedly bright year for the home construction industry.