U.S. Housing Starts Unexpectedly Tumble 2.6% In August

(RTTNews) - New residential construction in the U.S. unexpectedly saw further downside in the month of August, according to a report released by the Commerce Department on Thursday.

The Commerce Department said housing starts tumbled by 2.6 percent to an annual rate of 1.309 million in August after plunging by 9.0 percent to a revised rate of 1.439 million in July.

Economists had expected housing starts to spike by 6.1 percent to an annual rate of 1.315 million from the 1.239 million originally reported for the previous month.

The extended slump in housing starts came as multi-family starts plummeted by 21.7 percent to an annual rate of 357,000, more than offsetting a 7.6 percent spike in single-family starts to an annual rate of 918,000.

"We see starts mostly moving sideways until the latter part of 2027 although the latest backup in interest rates adds downside risk to our forecast," said Nancy Vanden Houten, Lead U.S. Economist at Oxford Economics.

She added, "Builders of single-family homes - which account for more than two-thirds of starts - will need to work down more of their inventory before they boost construction and that will become more difficult with mortgage rates near 7%."

The report said building permits also dove by 2.7 percent to an annual rate of 1.394 million in August after jumping by 4.3 percent to a revised rate of 1.433 million in July.

Building permits, an indicator of future housing demand, were expected to tumble by 2.3 percent to an annual rate of 1.410 million from the 1.443 million originally reported for the previous month.

Single-family permits slid by 1.8 percent to an annual rate of 878,000, while multi-permits plunged by 4.3 percent to an annual rate of 516,000.

A separate report released by the National Association of Home Builders on Wednesday showed homebuilder sentiment in the U.S. has deteriorated by much more than anticipated in the month of September.

The report said the NAHB/Wells Fargo housing market index fell to 32 in September after inching up to 35 in August. Economists had expected the index to edge down to 34.

With the bigger than expected decrease, the housing market index dropped to its lowest level since hitting a matching reading a year ago.