Residential Construction in August Hit Highest Rate Since 2007
A steady labor market and lowering mortgage rates led to one of the decade's best months for residential construction starts.
US housing starts in August reached their highest levels since July 2007, according to data from the US Census Bureau. Overall residential construction increased by 12.3%, driven largely by jumps in the rate of the construction of both single-family housing (up 4.4 percent compared to July 2019) and buildings with five units or more (up 14.9% compared to July 2019).
Of the four regions in the U.S., the northeast was the only area to report a decrease in the rate of single family housing construction. The midwest saw the largest growth in single-family housing starts, which were up 8.7 percent over the previous month and 16.1 percent over the previous year.
According to Bloomberg, this growth can most likely be attributed to a solid labor market and low mortgage rates across the country.
“Residential construction appears to be finally getting a boost from lower mortgage rates, although uncertainty about the economic outlook could limit the upside potential in activity by weighing on both builders’ and potential homeowners’ sentiment,” said Bloomberg Economists Shulyatyeva and Husby.
Housing starts are a key economic indicator in the U.S. as they directly reflect how confident consumers are in building and purchasing homes.
“This solid report is in line with our latest survey on builder sentiment,” said Greg Ugalde, chairman of the National Association of Home Builders in a press release. “However, builders continue to wrestle with affordability concerns stemming from excessive regulations and other supply-side challenges.”
The September NAHB Housing Market Index, a monthly survey of NAHB members meant to indicate confidence in the housing market, was the highest it has been since October 2018. It seems that the housing market is trending in a positive direction despite fears of a recession and the current labor shortage in the U.S.