U.S. Housing Starts and Permits (August 2020)

Housing Starts Weaken in August

• Housing starts weakened in August, decreasing by 5.1% month-on-month to 1.42 million units (annualized). This was below consensus expectations, which called for 1.48 million starts last month. 
• The decline was driven by the multi-family segment, which fell by 23% m/m to 395k in August, giving back much of the gains made from May to July. Single-family starts, on the other hand, advanced by 4.1% on the month, and reached 1.02 million units, a level not seen since February. 
• Building permits for the month decreased by 0.9% to 1.47 million. The weakness can be attributed to a -14.2% drop in multifamily permits. Meanwhile, single-family permits again exhibited strength, rising for the fourth straight month by 6.0% to 1.04 million, the highest level since June 2007.
• By region, the picture was mixed. Housing starts in the Midwest (+28.4%) and West (+19.5%) saw strong gains, while the Northeast (-33.1%) and South (-17.7%) declined.   

Key Implications

• Following a strong rebound coming out of the lockdown period, where growth averaged 17% m/m, housing construction is beginning to show signs of cooling in August. Underneath the hood, however, a different picture emerges. Construction for single family homes is continuing at a solid pace, while multi-family starts are weakening. 
• This is likely down to the impact of the pandemic. Given the perceived health risks posed by dense living as well as more permanent work from home policies, demand for single family homes has increased recently. Homebuilders appear to be moving to fulfill that demand.   
• Housing activity has quickly bounce backed over the past few months and all signs are pointing to continued growth in the fourth quarter. But with the economic recovery slowing, home prices rising, and pandemic-related uncertainty still elevated, the housing market will probably see the pace of gains slow in the coming quarter.  

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