Pleasant Surprise: Housing Starts Up in August

• September 21st 2010

by Will Smith

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Some unexpectedly good news on the housing front made national headlines today: the Commerce Department reported that housing starts in August jumped 10.5 percent over July to an annual rate of 598,000 units. The number marks a four-month high and was above analysts’ predictions. Housing starts represent the number of individual housing units that began construction in a given month.

Another figure released today, building permit authorizations, rose a modest 1.8 percent over July to reach an annual rate of 569,000. Together, housing starts and building permits are looked to as leading indicators of the housing market’s direction.

Now for some words of caution.

While today’s numbers are a welcome reprieve from the gloomy housing news of recent months, the surge in housing starts is being attributed to a 32 percent increase in multifamily homes (buildings with more than 5 units), which actually represent a relatively small piece of the overall housing market. They also represent a more volatile piece in terms of construction, so analysts cautioned that this month’s hopeful numbers might amount to an aberration if there isn’t a sustained amount of multifamily development in the months ahead.

“[Multifamily starts] are up a big amount for the month, but the number might be half that next month,” an analyst at Chapdelaine Credit Partners told CNNMoney. “Looking at the overall market, the number [of single-family home starts] is the more applicable number.”

Then there is the even larger question of the overall economy.

“Today’s data on housing activity is welcome positive news,” Commerce Secretary Gary Locke said in a statement. “We’re headed in the right direction, but we know that the housing market is tied directly to jobs and incomes.”

The full report from the Commerce Department is available here.

This article originally published at http://dc.urbanturf.production.logicbrush.com/articles/blog/pleasant_surprise_from_the_housing_market/2495.