Housing starts rage even as builders allow a drop to 15 months

Bloomberg News / Landov

Numbers: Housing starts reached a seasonally adjusted annual rate of 1.282 million in August, the Commerce Department said Wednesday. This figure was 9.2% higher than July and 9.4% higher than last year.

What happened: In August, home builders paved the way for new homes, which is good news for the housing market in short supply. The pace of August broke the MarketWatch consensus of 1.249 million. But they asked for less permits: the 1.229 million permits rate in August was down 5.7% for the month and 5.5% from the previous year. The pace of August permits was the lowest since May 2017.

Builder confidence worsens this year, with a sentiment unchanged in September, according to an industry group. Strong consumer demand is offset by high input costs and new tariffs do not help.

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Big picture: The new government reports are based on small samples and can be subject to major revisions. Since the beginning of the year, housing starts have increased by 6.9% compared to the same period of last year.

In August, single-family housing starts edged up 1.9% for the month. Single-family permits, the measure that some economists consider the most critical to understand the activity of builders, plunged by 6.1%. As most single-family homes are built for purchase rather than for rent, analysts believe that the increased activity of automakers is betting on a stronger economy and healthier consumers.

What they say: "The permits have clearly disappeared from the 1.38 million cycle set in March of this year, and suggest that housing starts are likely to remain remote for the rest of the year," said Robert Kavcic, Senior Economist at BMO Capital. Markets. "This is consistent with our view that residential construction appears to be largely detrimental to overall economic growth at this stage of the cycle."

Stephen Stanley, chief economist at Amherst Pierpont, Securities, was more direct: "To be clear, there is a fundamental lack of housing."

Stanley said: "Industry sources suggest that the steady appreciation of home prices in recent years has finally reached a point that many potential buyers are criticizing. In addition, changes to tax legislation in December began to affect high-end homes in high-tax jurisdictions. In addition to this, the construction of new homes has been affected by rising material costs this year, causing builders in a vice between rising costs and a decreasing appetite of potential buyers to pay. "

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Market reaction: Homebuilder inventories are under pressure this year, largely because investors are worried that rising interest rates will reduce buyer demand. PulteGroup, Inc.

PHM, + 1.09%

stocks are down 19% year-to-date so far, while the shares of D.R. Horton, Inc.

DHI + 1.50%

have lost more than 15%.