Housing starts fell sharply in August, signaling some uncertainty in the housing market’s recovery, according to the U.S. Census Bureau and Department of Housing and Urban Development.
Housing starts fell 14.4 percent in August, to an annualized rate of 956,000 units from a revised 1.12 million units in July, the biggest drop since April 2013.
Economist attribute the drop to a fall in construction of multifamily units — typically apartments and condominiums.
Despite the August drop, construction starts were up 8 percent from a year earlier. The July surge in construction was led by apartments, with builders responding to consumer demand. Construction of apartments has propelled much of the growth in residential construction over the past year.
But hundreds of thousands of Americans, especially Millennials, are still sitting on the sidelines, choosing to live with their parents or doubling up with roommates to save money.
When tracked along with real estate owned, or REO activity, we can see that housing starts have been slowly improving since 2011, while REO activity has been steadily declining. Nationwide, there were 26,343 REOs in August — and are on pace to reach about 300,000 for the year — according to RealtyTrac. For every bank owned foreclosure there are roughly two homes built.
Meanwhile, most incomes remain below pre-recession levels, making it harder for families to save for a down payment and qualify for a mortgage.