New residential housing starts plummeted to their slowest pace since 2020 according to the U.S. Census Bureau and the Department of Housing and Urban Development. In August, housing starts dropped to a seasonally adjusted annual rate of 1.283 million, falling short of the forecasted 1.440 million. This marks an 11.3% decrease from July and a 14.8% decline compared to one year ago.
Here is the opening of this morning's monthly report:
Privately‐owned housing starts in August were at a seasonally adjusted annual rate of 1,283,000. This is 11.3 percent (±8.3 percent) below the revised July estimate of 1,447,000 and is 14.8 percent (±9.0 percent) below the August 2022 rate of 1,505,000. Single‐family housing starts in August were at a rate of 941,000; this is 4.3 percent (±8.8 percent)* below the revised July figure of 983,000. The August rate for units in buildings with five units or more was 334,000. [link to report]
Background on Housing Starts
Housing starts track how many residential buildings began construction in the preceding month. The data is divided into three types of structures: single-family homes, residences with 2-4 units (condos or townhouses), and structures with 5+ units (apartment complexes). A critical aspect of the home-building industry is the powerful influence it has on the rest of the economy.
Here is the historical series for total privately-owned housing starts, which dates from 1959. Because of the extreme volatility of the monthly data points, a six-month moving average has been included.
Housing Starts: The Population-Adjusted Reality
Here is the data with a simple population adjustment. The Census Bureau's mid-month population estimates show substantial growth in the US population since 1959. Here is a chart of housing starts as a percent of the population. We've added a linear regression through the monthly data to highlight the trend.
Housing Starts: A Footnote on Volatility
The extreme volatility of this monthly indicator is the rationale for paying more attention to its six-month moving average than to its noisy monthly change. Over the complete data series, the absolute MoM average percent change was 6.3%. The MoM range minimum was -27.0% and the maximum was 29.3%. The latest month-over-month percent change is 11.3%.
For visual confirmation of the volatility, here is a snapshot of the monthly percent change since 1960.
ETFs associated with home builders include: Invesco Dynamic Building & Construction ETF (PKB), iShares U.S. Home Construction ETF (ITB) and SPDR S&P Homebuilders ETF (XHB).
ETFs associated with residential real estate include: iShares Residential and Multisector Real Estate ETF (REZ).
This article was originally written by Doug Short. From 2016-2022, it was improved upon and updated by Jill Mislinski. Starting in January 2023, AP Charts pages will be maintained by Jennifer Nash at VettaFi | Advisor Perspectives
For additional perspectives on residential real estate, here is the complete list of our monthly updates:
More Real Estate Topics >
