Total Housing Starts Fall in August

The seasonally adjusted annualized rate of building permits issued nationwide for new housing construction fell by 2.5% from July to August of this year but remained at a level (1.669 million units) that was still 3.9% higher than during August of last year.

The permit pace during August was lower than in July in the Northeast (-11.0% over the month) and the South (-4.1%). But permit volume rose slightly during August in the West (+1.5%) and Midwest (+0.9%).

From July to August, single-family home permit volume was actually up nationwide, rising by 1.7% from the July annualized level to its second-highest pace (trailing only February) of 2002. But the volume of new multifamily work permitted plunged by 15.0% over the month, following three consecutive months of solid increase for the multifamily sector.

Through the first eight months of this year, total permit volume nationwide was running a solid 3.7% ahead of the total for January-August of 2001. Single-family permit volume was 4.4% greater than a year ago through the first eight months of 2002, while the total number of units newly permitted in multifamily buildings was just slightly above (+0.7%) the 2001 pace.

Housing starts activity declined for the fifth time in the past six months during August, however, suggesting some lengthening delay on the part of cautious home builders between permit issuance and the initiation of actual construction activity.

The annualized pace of total housing starts fell by 2.2% from July to August, bringing the level down to the still-healthy volume of 1.609 million units. And this was a home construction pace still 3.0% stronger than in August 2001.

New single-family homes were started at a rate 4.4% slower in August than during July. But despite the August decline in permitted future activity, the level of new multifamily construction starts actually increased by 6.3% from July to August. Total August 2002 single-family starts (after seasonal adjustment) were 1.7% weaker than in August 2001, but the multifamily sector recorded an over-the-year gain of 24%.

During the first eight months this year, overall housing starts totaled an estimated 1,144,300 units. This was a total 3.6% greater than during the first eight months of 2001. The multifamily sector recorded 3.3% more starts through August of this year than during the comparable period of 2001, while starts of single-family homes increased by 3.7%.

The starts pace fell in two of the four regions of the country from July to August. Starts declined most steeply in the Midwest (-18.7%), after rising at a 7.1% rate the month before. However, through the first two-thirds of 2002, total starts were up at least a bit compared with the year-ago pace in all regions except the West (-0.6%). Regional gains ranged from solid growth of 7.4% in the Northeast and 6.4% in the South to an over-the-year increase of 0.9% in the Midwest.

Thirty-year fixed-rate mortgages carried an average interest rate of 6.29% this August, down from the 6.95% average of August 2001. Adjustable-rate mortgages tied to the yield on one-year Treasury bills averaged an interest rate of 4.38% during August of this year, well below the 5.71% average recorded during August 2001.

Single-family home sales declined by 1.1% (annualized) from July to August. But through the first eight months of 2002, overall (new and existing, combined) single-family home sales were running more than 4% ahead of the total for January-August of 2001.

New single-family home sales (at a seasonally adjusted annualized rate) were estimated to be 1.9% higher in August of this year than during July. And the August 2002 annualized sales pace was more than 14% healthier than during August 2001. The Commerce Department estimates that total sales of new homes throughout the nation during the first eight months of this year were 4.2% greater than during the first eight months of 2001.

Although the number of new single-family homes sold this year has declined slightly in the Northeast (-3.7%), this has been more than offset by strong increases in the West (+10.2%), Midwest (+5.5%) and South (+1.4%).

The average sales price of a new home sold this August ($221,000) was 6.5% higher than in August 2001. However the median price ($175,300) of new homes sold this August was only 0.9% above the level for the same month a year earlier, so it's clear that the weak economy has begun to have some impact on house prices and/or on the "mix" of the kinds of homes being purchased. But the "bubble" - if indeed there is one - certainly hasn't burst yet.

Existing single-family homes sold at an annualized rate of 5.28 million units during August of this year, according to data compiled by the National Association of Realtors. This pace was 1.7% slower than in July. Compared with August 2001, existing home sales this August were off 3.8%. But home resales were still running at a record-high pace through the first two-thirds of 2002. The NAR projects that overall sales of existing single-family homes during 2002 will total approximately 5.44 million units, up 2.7% from the record set last year.

The median price of an existing home sold during August 2002 was $163,600, while the average price of a resale was $204,100. These prices represented gains of 6.4% and 5.5%, respectively, over the values recorded during August 2001. The NAR notes that while price appreciation rates are still very healthy, they have backed off a bit from the near-double-digit over-the-year increases recorded during the spring of this year.