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Real Estate

Single-family housing starts improve

Builders remain cautious in game-changing market

The increase in housing starts fell short of expectations in August, up a slight 0.9% from July, the Census Bureau revealed Wednesday.

Housing starts in August were at a seasonally adjusted rate of 891,000, compared to the revised July estimate of 883,000.

"The small rise in starts in August, which was below expectations and would have been a fall were it not for downward revisions to earlier data, is not as disappointing as it first appears," said analysts at Capital Economics. "The figures are skewed by the volatile multi-family sector; single-family starts posted an encouraging gain."

The August rate is 19% higher than the August 2012 rate of 749,000.

Daren Blomquist, vice president of RealtyTrac, believes that the latest report suggests builders are looking much more carefully at the market.

"Builders continue to be very cautious given what they’ve been through the past seven years," said Blomquist. "They do recognize that you have several things at play that could change this sort of frenzied buying activity that we’ve been seeing over the last six months," he added.

According to Blomquist, the current market is similar to the market we were seeing 5-to-10 years ago, so many of the builders that experienced that market aren’t assuming this one will last.

"That’s what got them into trouble last time," said Blomquist. He added that Wednesday’s report may not be what some people want to see from an economic perspective, but he believes it is a good sign that builders are being cautious and not overextending themselves. Executive Vice President Rick Sharga has a much brighter view of Wednesday’s housing starts data.

"The most positive aspect of today’s numbers were the fact that single-family starts were up pretty significantly," said Sharga.

In August, single-family housing starts were at a rate of 628,000, up 7% from the revised July figure of 587,000. The August rate for homes in buildings with five units or more reached a pace of 252,000 units.

Sharga noted that it’s not unusual on a month-to-month basis to see some ebb and flow. "What we’re seeing is really an adjustment as builders try to figure out where they really are," he added.

When reports fall short of expectations, it’s easy to take a negative view of it, said Sharga. However, it’s important to look at the composition under the top-line numbers, he explained.

Sharga added, "If we’re looking at somewhere between 880,000-895,000 housing starts per year, that’s probably about what the current market can absorb. Any higher, we really can’t handle."

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