By Geoffrey Smith
Investing.com -- The number of permits given to build new houses slumped in August, as higher building and borrowing costs tempered demand, but housing starts still posted their biggest monthly gain in over a year.
Building permits fell 10% from July to 1.517 million, their lowest level in two years. However, housing starts surprisingly bounced by over 12% to 1.575 million, comfortably beating expectations for a figure roughly unchanged from July.
The rebound in housing starts is a conspicuous outlier to other recent data from the housing market, which have almost without exception shown the sector cooling off rapidly under the weight of successive interest rate hikes from the Federal Reserve and an end to the pandemic that triggered a rush for larger single-family homes with more space to accommodate remote working practices.
Nancy Vanden Houten, an analyst with Oxford Economics, noted that that softening trend is likely to reassert itself in the coming months.
"We look for housing starts to soften from the August pace," Vanden Houten said in a note to clients. "While a shortage of homes continues to persist, more cautious homebuilders are expected to slow the pace of construction in response to higher interest rates and a slowing economy."
The bounce in housing starts was most notably in multi-family units, which tend to represent cheaper and smaller living spaces. They rose to 621,000, their highest since 1986. Single-family housing starts, by contrast, rose by a more modest 3.4% to 934,000, a figure that is well below recent months' average of over 1 million.
The numbers come a day after the National Association of Homebuilders reported a ninth straight drop in confidence across the industry in its monthly survey for September.
“Buyer traffic is weak in many markets as more consumers remain on the sidelines due to high mortgage rates and home prices that are putting a new home purchase out of financial reach for many households,” NAHB Chairman Jerry Konter said in a statement.
The Mortgage Bankers Association said last week its reference rate for 30-year home loans had topped 6% for the first time since before the Great Financial Crisis of 2008. Annual house price inflation, meanwhile, has been running at over 18% for the last 12 months, according to S&P Global (NYSE:SPGI)'s monthly assessments.