• U.S. housing starts rebounded by 12.3% in August, after three straight months of declines. Markets were expecting a smaller 5% jump. Housing starts were 1.36 mn units in August, a new cycle high.
  • August’s rebound was concentrated in multifamily units, up 32.8%. Single family starts were also higher for the third consecutive months, rising 4.4%.
  • Permits were higher for both single (+4.5%) and multifamily (+13.3%) units in August.
  • Regionally, most of the country posted double-digit gains in housing starts in August, including the Northeast (+30.5%), Midwest (+15.4%) and South (+14.9%). While overall starts were flat in the West, starts of single family homes were up 5.3% in the region.

Key Implications

  • Well that is more like it. For some time all the stars have been aligned on the demand side for new home construction: unemployment is very low, mortgage rates have fallen significantly, and we’ve seen solid gains in wages. In August, we finally started to see a more encouraging response on the supply side.
  • Looking at the six-month trend, multifamily construction has rebounded sharply since its weakness over the winter. While single family home construction is showing nascent signs of an upturn after decelerating in the latter half of 2018. A healthy gain in permits for both segments suggest the upturn will continue in the near term.
  • There are many downside risks confronting the U.S. economy, which we expect will lead the FOMC to cut rates a quarter point later today. New home construction has long been an area of disappointment in the domestic economy, but today’s data provides some hope that things may be looking up for the sector.

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