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BUSINESS
Wells Fargo

August housing starts rise 0.9%

Julie Schmit
USA TODAY
A worker climbs on the roof of a home under construction in Phoenix.
  • Too many vacant homes%2C too few new households to support more building
  • Construction activity lags in the housing recovery

Housing starts rose 0.9% in August, less than expected, as the volatile apartment sector weighed on top line results.

Single family home starts, however, were up 7% from July and hit their highest level in six months, the Commerce Department reported Wednesday.

Single family starts increased the most in the West, rising 17.5% from July. Many Western cities have especially tight supplies of homes for sale.

Overall, housing starts came in at a seasonally adjusted annual rate of 891,000, still 19% above last year's levels.

Building permits -- an indicator of future construction -- declined 3.8% from July but remained 11% above the level of a year ago.

Single-family permit levels were at their highest level since May, 2008, with all regions up. They rose to an annual rate of 627,000 and were 3% above July levels.

Higher interest rates had little impact on August housing starts, says Trulia economist Jed Kolko. Rates matter more for single-family homes than multi family housing and the single family starts were strong, he says.

In September, home builder confidence held steady after four consecutive months of improvement, the National Association of Home Builders/Wells Fargo Housing Market Index showed Tuesday.

NAHB Chief Economist David Crowe cited a "pause in the momentum" given higher interest rates, tight credit and shrinking supplies of lots for sale.

In August, starts for buildings with five or more units fell 9.4% from July.

Overall, construction activity — including new home starts and home sales — is lagging in the housing recovery, Kolko says.

Activity is still 40% to 50% below normal levels because the nation has too many vacant homes and household formation is still too low to support more normal building levels, Kolko says.

Household formation has averaged 560,000 annually since 2007, roughly half of normal levels, Kolko says.

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