Housing starts decreased 6.2% last month to a seasonally adjusted 895,000 annual rate. Single-family home groundbreakings also declined, and building permits fell sharply. Economists surveyed by Dow Jones Newswires expected August starts to drop by 1.6% to a 950,000-unit annual rate. The level of 895,000 was the lowest since 798,000 in January 1991.
July housing starts decreased 12.4% to 954,000, revised down from the originally reported drop of 11.0% to 965,000-unit annual rate. The July tumble reflected a payback for a surge the month before caused by a change to New York City building codes. The city had enacted a set of construction codes effective for apartment building permits authorized as of July 1, and builders rushed for permits during June to beat the deadline; that served to drive up U.S. starts and permits in June.
Wednesday's data showed housing starts year over year in August were 33.1% below the level of construction in August 2007. Building keeps retreating because inventories of unsold homes are so high. A report Tuesday by the National Association of Home Builders showed the trade group's latest monthly survey of builders' thoughts on market prospects rose, yet remained weak. The NAHB's September index measuring builder confidence climbed to 18 from a record-low 16. The index gauges builder perceptions on new-home sales. The latest government data showed new-home sales were down 35% over the 12 months from July 2007. Analysts attributed the increase in the NAHB index to higher expectations for sales over the next six months because of the recent decline in mortgage rates.
"The main message here is that home builders still see extremely poor conditions in the housing market, and their expectations remain low despite some improvement," said Abiel Reinhart, an economist at JPMorgan Chase.