Housing Starts Down, Confidence Up

Housing starts, completions and building permits all fall in August, but builder confidence is boosted

Mark Jarasek, Senior Editor, Electronic Media
September 17, 2008
HousingZone

Housing starts fell in August to an annual rate of 895,000, which is 6.2 percent below the revised July estimate of 954,000, according to figures released by the U.S. Commerce Department today. The August 2008 housing starts are off 33.1 percent from August 2007 starts, which stood at 1,337,000.

August building permits, which provide a look into future home building activity, were at a seasonally adjusted annual rate of 854,000, down 8.9 percent from July’s rate of 937,000, and down 36.4 percent from year-ago figures, the Commerce Department reported.

Housing completions joined the crowd posting 961,000 in August, down 9.8 percent from July’s revised estimate of 1,065,000 and 35.8 percent below the August 2007 rate of 1,498,000, according to the Commerce Department figures. 

HousingZone visitors: Here's a link to Commerce Department News Release with additional data

"Builders understand that there is still a substantial amount of unsold inventory to be worked down, and they continue to do the right thing by reducing production and pulling fewer permits for new homes to help restore better balance between supply and demand," noted Sandy Dunn, National Association of Home Builders (NAHB) president and a home builder from Point Pleasant, W.Va.

Boost in Builder Confidence

In related news, the NAHB reported that builder confidence in the market for newly built single-family homes rose for the first time in seven months this September, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). The HMI gained two points to 18, rising from its record low of the previous two months.

"Builders have several reasons to be more optimistic at this time," noted Dunn, "Many are sensing that home sales are nearing a turning point with the support of the newly enacted first-time home buyer tax credit. Meanwhile, with the government's explicit backing of Fannie Mae and Freddie Mac now assured, this should help keep mortgage rates at very favorable levels going forward."

Following the Treasury Department's announcement that it was placing mortgage giants Fannie Mae and Freddie Mac into conservatorship last week, the average rate on 30-year fixed-rate conforming home mortgages declined by nearly half a percentage point, falling to below 6 percent for the first time in several months. Market responses to the Lehman Brothers bankruptcy filing and the purchase of Merrill Lynch by Bank of America have put additional downward pressure on prime conforming mortgage rates.

"Nearly half of the builders in our September survey indicated that they expect to see a positive impact from the tax credit in their market areas," said NAHB Chief Economist David Seiders. "Of those respondents, 20 percent said their market has already experienced some of this effect. Meanwhile, consumer confidence has risen and more households are saying that now is a good time to buy a home. All of these factors, along with the recent downward movements in mortgage rates, suggest that new-home sales will be stabilizing in the final quarter of the year."