Builders’ efforts to replenish the supply of multifamily housing units pushed housing starts by 10.5 percent to an adjusted annual rate of 598,000 units in August, based on figures released by the U.S. Commerce Department. Analysts say that the rate was about the same as the rate of housing production before the federal tax credits pushed up housing sales in the first months this year.
Multifamily housing units shot up by 32.2 percent in August to 160,000, helping increase the overall number of housing starts during the month. The increase was in line with the Multifamily Market Index of the National Association of Home Builders for the second quarter this year, which showed that the existing and expected demand for rental apartments improved sharply compared to the first quarter. The MMI indexes for Class A, Class B and Class C apartment buildings grew by more than 15 points from the first quarter to 59.5, 57.6 and 56.6 points, respectively.
Housing permits also increased largely because of increased activity in the multifamily sector. Building permits for multifamily projects grew by nearly 10 percent in August to an adjusted annual rate of 168,000 units. The overall annual rate for both single-family and multifamily housing increased by almost two percent to an adjusted annual rate of 569,000 units.
Housing starts for single-family homes increased in August, but at a lesser rate compared to multifamily housing. Single-family starts rose by only 4.3 percent to an adjusted annual rate of 436,000 units. This rate was also lower by more than nine percent compared to the single-family rate in August 2009.
Building permits for single-family homes decreased, as single-family home construction activity slowed in the Midwest and in the South. An adjusted annual rate of 401,000 units was posted in August, almost seven percent lower than the rate in August last year. Permits increased by 19 percent in the West while the total was unchanged in the Northeast.
With regards to housing starts for both multifamily and single-family housing in regions in August, the totals increased in the West, Midwest and the South by 34.3 percent, 21.7 percent, and 7 percent, respectively. It was in the Northeast where housing starts dropped by 24.3 percent.
According to NAHB officials, home builders are still struggling from the tight lending environment and the uncertainty of housing demand. Just like in previous months, the housing market is still battered by high unemployment rates, huge number of foreclosed homes and buildings, and consumer uncertainty about the U.S. and global economies.
Nevertheless, builders see further improvements in starts in the multifamily housing sector in the next several months. The NAHB explained that the slowdown in the construction of multifamily housing in the past several months and the subsequent decline in supply will trigger new multifamily construction when the market re-emerges from the doldrums.