U.S. homebuilding unexpectedly increased in August as rising rents boosted the construction of multi-family housing to the highest level in more than 36 years, but soaring mortgage rates and high prices are undercutting the overall housing market.
The report from the Commerce Department on Tuesday showed permits for future homebuilding plunged to levels last seen during the first wave of the COVID-19 pandemic in the spring of 2020. Homebuilding is also being hobbled by persistent supply chain bottlenecks, which are raising prices for materials.
Economists polled by Reuters had forecast starts would come in at a rate of 1.445 million units. Housing starts dipped 0.1% on a year-on-year basis in August. Single-family housing starts, which account for the biggest share of homebuilding, increased 3.4% to a rate of 935,000 units, after declining every month since March. Single-family homebuilding rose in the Midwest, the densely populated South and the West, but plunged in the Northeast.
Economists expect spending on homebuilding to contract further this quarter after it declined at its steepest pace in two years in the April-June quarter. Weak residential investment contributed to the second straight quarterly drop in gross domestic product during that period.
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