Multifamily homes restrain U.S. housing starts, permits in August

Wed Sep 18, 2013 9:11am EDT
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By Lucia Mutikani

WASHINGTON (Reuters) - U.S. housing starts rose less than expected in August as multi-family activity slowed sharply, but a surge in permits to build single-family homes pointed to a sustained strengthening in the housing market recovery.

The Commerce Department said on Wednesday housing starts increased 0.9 percent to a seasonally adjusted annual rate of 891,000 units. July's starts were revised down to a 883,000-unit pace instead of the previously reported 896,000 units.

Economists had expected groundbreaking to rise to a 917,000-unit rate last month.

Starts for the volatile multi-family segment tumbled 11.1 percent to a 263,000-unit rate last month. But groundbreaking for single-family homes, the largest segment of the market, surged 7.0 percent to a 628,000-unit pace.

That was the highest since February and took some of the sting out the report. The drop in multifamily starts suggested a spike in mortgage rates could be making developers a bit cautious about taking on new projects.

Higher mortgage rates have slowed the pace of home sales, but demand for accommodation as household formation continues to recover from multi-decade lows is expected to keep residential construction supported.

In a separate report, the Mortgage Bankers Association said applications for loans to buy a home rose last week as mortgage rates eased off recent highs.

Mortgage rates have risen in anticipation of the Federal Reserve reducing the $85 billion in bonds it is buying each month to keep interest rates low. Economists believe the Fed will make an announcement on the future of the program at the end of a two-day meeting later on Wednesday.   Continued...

New townhouses under construction are seen in Fairfax, Virginia, just outside of the capital Washington, September 1, 2013. REUTERS/Larry Downing