Limitations on access to financing and persistent low confidence in housing demand continue to impact the strength of the residential new construction market, despite some improvements in August. According to NAHB chief economist David Crowe, August's construction activity returned to levels experienced prior to the implementation of the new home buyer tax credit, and focus has shifted from single-family to multifamily production.
August's "New Residential Construction Report," released by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development, showed overall improvements in housing permits, starts, and completions, but the majority of the gains were on the multifamily side.
Permits for privately owned units rose to 1.8 percent in August to a seasonally adjusted annual rate of 569,000, mostly due to an 11.9 percent jump—to a rate of 150,000—in permits for residences in buildings of five or more units. Single-family authorizations slid by 1.2 percent, echoing July's rate of decline. Reflecting continued uncertainty and weakness in housing markets, August's rate for overall permits was 6.7 percent below the August 2009 rate of 610,000.
Starts of privately owned housing units increased in August by 10.5 percent to a rate of 598,000, and while single-family housing starts registered a relatively healthy 4.3 percent gain, the start rate for buildings of five-plus units surged by a hefty 42.7 percent to 147,000
Completions of residences in buildings with five or more units also escalated in August, from 88,000 in July to 115,000—a 30.7 percent increase—while single-family completions increased only 1.3 percent. August's overall housing completions registered a 5.6 percent increase to a total rate of 603,000, but this is 23.7 percent below the rate for the same period last year.
"Consumer uncertainty about the economy, the poor job market, and the large number of foreclosed properties for sale continue to be a drag on housing," commented the NAHB's Crowe in a statement about the housing data. "However, favorable home buying conditions should help spur additional demand as the job market gradually improves later this year."
The latest Architecture Billings Index (ABI) released by the American Institute of Architects (AIA) reflects the current strength of the multifamily sector, which scored an ABI of 46.9 in August and ranked second behind the commercial/industrial segment. While still reporting a continued decline in demand for architecture, the ABI's August score of 48.2 marks the third straight month of incremental increases. The new projects inquiry score also increased in August to 54.6.
The AIA’s chief economist, Kermit Baker, posits that project cancellations continue to hobble the construction industry's recovery across all sectors.