WASHINGTON, Sept. 21 Reuters - U.S. homebuilding increased more than expected in August, but sustained weakness in single-family projects suggested builders continued to struggle with higher input costs as well as labor and land shortages.
Housing starts advanced 3.9% to an annual rate adjusted seasonally for 1.615 million units last month, the Commerce Department said on Tuesday. Data for July was revised up to a rate of 1.554 million units from the previous figure of 1.534 million units.
Economists polled by Reuters forecast that starts would rebound to a rate of 1.555 million units and rise. Start of housing increased 17.4% compared to August 2020.
Single-family starts, which account for the largest share of the housing market, dropped 2.8% to a rate of 1.076 million units. That was the second straight monthly downward recovery. Single-family business starts dropped in the Midwest and west. They rose to the densely populated South and the Northeast.
Higher input costs and shortages remain headwinds for builders, said Rubeela Farooqi, Chief U.S. Economy at High Frequency Economics in White Plains, New York. But still-low inventories should be a positive for activity as these constraints ease. Starts for buildings with five units or more soared 21.6% to a rate of 530,000 units. The multi-family housing segment is boosted by demand for rentals as COVID-19 vaccinations allow companies to recall workers to offices in city centers.
Early in the pandemic of coronavirus there was an exodus from cities as people worked from home and took online classes, fuelling demand for bigger homes in the suburbs and other low density areas. While the pandemic tailwind is fading, demand for housing remains strong thanks to near record low mortgage rates and rising wages from a tightening labor market.
But scarce lumber and expensive land and workers makes it harder for builders to keep up.
A survey from the National Association of Home Builders on Monday showed confidence among single-family homebuilders from a 13 months low in September, but it noted that delivery times remain extended and the chronic construction labor shortage is expected to persist. Permits for future homebuilding rose 6.0% to a rate of 1.728 million units in August. Single-family permits gained 0.6% with a rate of 1.054 million units. Permits for buildings with five units or more jumped 19.7% to 632,000.
We conjecture that this strength in the multifamily community may be a response to the low raising of asking rents and the strong vacancy rates in rental units, said Conrad DeQuadros, senior economic advisor at Brean Capital in New York.