U.S. housing starts rose less than expected in August as multifamily activity slowed sharply, but a surge in permits to build single-family homes pointed to a sustained strengthening in the housing market recovery.
The Commerce Department said Wednesday housing starts increased 0.9 percent to a seasonally adjusted annual rate of 891,000 units. July's starts were revised down to a 883,000-unit pace instead of the previously reported 896,000 units.
Economists had expected groundbreaking to rise to a 917,000-unit rate last month.
Starts for the volatile multifamily segment tumbled 11.1 percent to a 263,000-unit rate last month. But groundbreaking for single-family homes, the largest segment of the market, surged 7.0 percent to a 628,000-unit pace.
That was the highest since February and took some of the sting out the report. The drop in multifamily starts suggested a spike in mortgage rates could be making developers a bit cautious about taking on new projects.
Higher mortgage rates have slowed the pace of home sales, but demand for accommodation as household formation continues to recover from multidecade lows is expected to keep residential
In a separate report, the Mortgage Bankers Association said applications for loans to buy a home rose last week as mortgage rates eased off recent highs.
Mortgage rates have risen in anticipation of the Federal Reserve reducing the $85 billion in bonds it is buying each month to keep interest rates low. Economists believe the Fed will make an announcement on the future of the program at the end of a two-day meeting later Wednesday.
U.S. financial markets were little moved by the data as investors awaited the Fed's statement on policy.
Permits to build homes fell 3.8 percent in August to a 918,000-unit pace, confounding economists' expectations for a 950,000 rate. Permits lead starts by at least a month. But the drag last month came from the multifamily sector, where permits dropped 15.7 percent. Permits for single-family
homes rose 3 percent to their highest level since May 2008.
The rise in single-family permits fits in with a survey Tuesday showing confidence among single-family homebuilders held near an eight-year high in September, with builders upbeat about
prospective buyer traffic.
The sustained gains in residential construction should help to support the economy.
Though home building only accounts for 3.1 percent of gross domestic product, economist estimate that for every single-family home constructed, three jobs that last for a year are created.
9 Numbers That'll Tell You How the Economy's Really Doing
Housing Starts, Permits Restrained by Slack Demand for Multifamily Homes
The gross domestic product measures the level of economic activity within a country. To figure the number, the Bureau of Economic Analysis combines the total consumption of goods and services by private individuals and businesses; the total investment in capital for producing goods and services; the total amount spent and consumed by federal, state, and local government entities; and total net exports. It's important, because it serves as the primary gauge of whether the economy is growing or not. Most economists define a recession as two or more consecutive quarters of shrinking GDP.
The CPI measures current price levels for the goods and services that Americans buy. The Bureau of Labor Statistics collects price data on a basket of different items, ranging from necessities like food, clothing and housing to more discretionary expenses like eating out and entertainment. The resulting figure is then compared to those of previous months to determine the inflation rate, which is used in a variety of ways, including cost-of-living increases for Social Security and other government benefits.
The unemployment rate measures the percentage of workers within the total labor force who don't have a job, but who have looked for work in the past four weeks, and who are available to work. Those temporarily laid off from their jobs are also included as unemployed. Yet as critical as the figure is as a measure of how many people are out of work and therefore suffering financial hardship from a lack of a paycheck, one key item to note about the unemployment rate is that the number does not reflect workers who have stopped looking for work entirely. It's therefore important to look beyond the headline numbers to see whether the overall workforce is growing or shrinking.
The trade deficit measures the difference between the value of a nation's imported and exported goods. When exports exceed imports, a country runs a trade surplus. But in the U.S., imports have exceeded exports consistently for decades. The figure is important as a measure of U.S. competitiveness in the global market, as well as the nation's dependence on foreign countries.
Each month, the Bureau of Economic Analysis measures changes in the total amount of income that the U.S. population earns, as well as the total amount they spend on goods and services. But there's a reason we've combined them on one slide: In addition to being useful statistics separately for gauging Americans' earning power and spending activity, looking at those numbers in combination gives you a sense of how much people are saving for their future.
Consumers play a vital role in powering the overall economy, and so measures of how confident they are about the economy's prospects are important in predicting its future health. The Conference Board does a survey asking consumers to give their assessment of both current and future economic conditions, with questions about business and employment conditions as well as expected future family income.
The health of the housing market is closely tied to the overall direction of the broader economy. The S&P/Case-Shiller Home Price Index, named for economists Karl Case and Robert Shiller, provides a way to measure home prices, allowing comparisons not just across time but also among different markets in cities and regions of the nation. The number is important not just to home builders and home buyers, but to the millions of people with jobs related to housing and construction.
Most economic data provides a backward-looking view of what has already happened to the economy. But the Conference Board's Leading Economic Index attempts to gauge the future. To do so, the index looks at data on employment, manufacturing, home construction, consumer sentiment, and the stock and bond markets to put together a complete picture of expected economic conditions ahead.