In August, housing starts hit their lowest level since June 2020, when builders were struggling with COVID-fueled “shutdowns, labor shortages and supply chain issues,” according to U.S. Census data.
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Housing starts fell 11.3 percent in August to a seasonally adjusted annual rate of 1,283,000 — 14.8 percent lower than a year ago and the lowest seen since the housing supply chain buckled under pandemic-related challenges.
“New construction is often viewed as a beacon of hope for the housing market, adding desperately-needed inventory that could help buyers facing affordability challenges. But in August, housing starts hit their lowest level since June 2020, when builders were struggling with shutdowns, labor shortages and supply chain issues,” NerdWallet home expert Kate Wood said in a statement.
The decline was fed in part by a steep drop in multifamily housing starts, which fell 41 percent between August 2022 and 2023, according to U.S. Census data.
The number of new units authorized by building permits increased 6.9 percent between July and August to a seasonally adjusted rate of 1,543,000, or 2.7 percent lower than in August 2022.
Housing completions clocked in at a seasonally adjusted rate of 1,406,000 in August — 5.3 percent above its July levels and 3.8 percent above the August 2022 levels of 1,355,000.
The fallback in housing starts lines up with a drop in homebuilder sentiment, which fell five points to a score of 45 following a drop of six points in August, according to the National Association of Home Builders on Monday — the lowest level recorded since April as mortgage rates top 7 percent.
Some experts pointed to the recorded increase in housing permits between July and August to suggest the drop in construction activity may be temporary as more builders prepare for new projects.
“Not all hope is lost,” Zillow Senior Economist Nicole Bachaud said in a statement. “Permits are up monthly indicating some builders might be more hopeful that things will turn around soon.”
Newly built homes have become increasingly attractive to buyers who can still afford to buy a home in the current high-rate environment, with the inventory of existing homes extremely limited due to most owners being unwilling to sell their home and lose their lower mortgage rate.