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With new construction of multi-family homes showing a significant rebound, the Commerce Department released a report Thursday morning showing that housing starts rose to their highest level in nine months in August.
The report showed that housing starts rose 1.5 percent to an annual rate of 598,000 in August from the revised July estimate of 589,000. With the increase, housing starts rose to their highest rate since coming at 655,000 in November of 2008.
Despite the monthly increase in housing starts, the August rate was still down 29.6 percent compared to the same month a year ago.
The monthly increase was largely due to a rebound in new construction of multi-family homes, with the August rate for buildings with five units or more jumping 35.3 percent to 115,000 after falling 15.8 percent to a July rate of 85,000.
At the same time, single-family housing starts fell 3.0 percent to an annual rate of 479,00 in August from the revised July figure of 494,000.
Peter Boockvar, equity strategist for Miller Tabak, noted that first-time homebuyer tax credits have distorted the housing market.
"The fate of the tax incentives are still to be determined, but the National Association of Realtors estimates that about 350,000 people of the 1.8-2 million that have used the credits to buy their first home would not have bought one without it," Boockvar said.
The Commerce Department also said that building permits, an indicator of future housing demand, rose 2.7 percent to an annual rate of 579,000 in August from the revised July rate of 564,000. Building permits also rose to a nine-month high.
The increase in building permits also reflected a notable increase in authorizations of buildings with five units or more, which more than offset a modest decrease in single-family authorizations.
On Wednesday, the National Association of Home Builders released a report showing that homebuilder confidence edged higher for a third consecutive month in September, with the NAHB/Wells Fargo Housing Market Index increasing in line with expectations.
The report showed that the housing market index edged up to 19 in September from 18 in August, meeting the expectations of economists. With the increase, the index rose to its highest level since May of 2008.
Joe Robson, chairman of the NAHB said, "Builders are seeing some improvement in buyer demand as a result of the first-time home buyer tax credit, and low mortgage rates and strong housing affordability have also helped to revive some optimism."
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