ConDig (19-Sept-18). Despite lingering concerns surrounding affordability, construction of new homes in the US rose 9.2% in August on an uptick in groundbreaking for single- and multi-family houses.
Total housing starts rose to a seasonally adjusted annual rate of 1.28 million compared with 1.17 million the month prior, according to latest figures from the Commerce Department.
It comes as single-family starts increased 1.9% to 876,000 units, while the multifamily sector—which includes apartment buildings and condos—surged 29.3% to a total of 408,000.
But housing permits, which are a sign of future construction activity, dropped 5.7% to 1.23 million units in August. Single-family permits fell 6.1% to 820,000 units and multifamily permits dropped 4.9% to 409,000 units.
“Builders remain largely confident because the economy is solid and demographics point to continued demand,” said National Association of Home Builders (NAHB) chairman Randy Noel. “However, affordability continues to be a concern for both builders and buyers.”
The rise comes despite a deepening skills shortage across the construction industry and high material costs.
Leaders of the homebuilding industry continue to warn about the rise in material costs, which has been exacerbated follow a decision by President Trump to slap a 25% tariff on imported steel and a 10% duty on foreign aluminum from Canada, Mexico and the European Union on May 31.
“Although we saw an increase in starts in August, we are likely to see softening in the market in the months ahead,” said NAHB chief economist Robert Dietz.
“Affordability is a particular concern because of home price gains, due in part to the high regulatory burden on new home construction. Increasing costs for building materials prompted partially by recently imposed tariffs on a wide range of products are also a concern. Moreover, interest rates are continuing their gradual upward climb.”
The NAHB this week raised concerns over President Trump’s decision to impose tariffs on an additional $200 billion worth of Chinese imports.