The rate of new home construction in the US raced to its highest level in more than 12 years in August, against a backdrop of declining borrowing costs after the Federal Reserve cut interest rates for the first time since the financial crisis.
New housing starts jumped 12.3 per cent month-on-month to a seasonally-adjusted annual rate of 1.364m last month from an upwardly revised 1.215m (previously 1.191m), sailing past the median forecast from Wall Street for 1.3m.
It was the quickest rate for starts since June 2007. Permits to build new homes also leapt to their highest since that same date, to a rate of 1.419m in August from 1.317m in July and also comfortably above analysts’ predictions.
The data, which come ahead of a Wednesday rate decision from the US central bank, suggest a slightly improved picture of the housing market, which had been regarded for some time as one of the weak spots in the domestic economy.
The jump in housing starts was driven by a sharp rise in multifamily apartments, which were up 30.9 per cent from July, but often tend to be volatile. Geographically, housing activity was strongest in the north-east and midwest regions.
Scott Volling, principal at PwC, said: “With both starts and permits coming in at levels not seen in over 12 years, the strength of the numbers reflect the optimism that builders have in the market.”
Mr Volling said the combination of strong demand and a still-favourable interest rate environment “should continue to drive solid monthly results”, but he added it remains to be seen whether the August result is an anomaly, particularly given challenges such as the US-China trade war and the high cost of labour and materials still faced by the industry.
The rate on a 30-year fixed rate mortgage fell to a two-year low of 3.67 in August, just weeks after the Fed cut the benchmark interest rate by 25 basis points in late July.