by Despite lingering affordability issues, officials say that Wednesday’s rate cut could soon lead to a boost in overall housing production
WASHINGTON —August housing construction fell below similar activity recorded last year, a sign that industry experts believe is related to housing affordability, which could improve slightly following the Fed’s decision Wednesday to cut interest rates by a quarter point.
Marking the first rate cut since December, it could take time for the move to significantly improve buyers’ ability to afford a mortgage. This could be the case particularly in light of other higher costs on anything from health care, taxes and insurance to automobiles and products impacted by tariffs, including furniture.
According to CNN, the Fed cut its benchmark lending rate to 4% from 4.25%, marking the first rate in about eight months.
According to information released Wednesday by the U.S. Department of Commerce, housing starts totaled 1,307,000 down 6% from 1,391,000 in August 2024 and 8.5% below a revised July estimate of 1,429,000. Of the August total, 890,000 of these, or 68.1% of the total, were single-family homes, 7% below a revised July figure of 957,000.
Building permits totaled 1,312,000, which was 11.1% below 1,476,000 in August 2024 and 3.7% below a revised July rate of 1,362,000. Of the total, 856,000, or 65.2%, were for single-family homes, which was 2.2% below the revised July figure of 875,000.
Housing completions totaled 1,608,000, which was 8.4% below 1,755,000 in August 2024 but 8.4% above the revised rate of 1,483,000 in July. Of these, 1,090,000, or 67.8% of the total, were for single-family homes, which was 6.7% above the revised July rate of 1,022,000.
The National Association of Home Builders said that the August reading of 1.31 million starts is the “number of housing units builders would begin if development kept this pace for the next 12 months. It said single-family starts are down 4.9% on a year-to-date basis and that the 890,000 reported for August was the lowest level of single-family home building since July 2024. It noted that multifamily sector that includes apartment buildings and condos declined 11.7% to an annualized 417,000 pace.
“Housing affordability is hurting buyer traffic for builders, and as a result builders have slowed single-family home construction,” said Buddy Hughes, chairman of the NAHB and a home builder and developer from Lexington, North Carolina. “Nonetheless, our latest survey shows builders reported an increase for future market expectations as mortgage rates have posted a modest decline in recent weeks.”
By region, year-over-year activity in August was as follows:
In the Northeast, August housing starts declined 11.6% to 107,000 from August 2024; building permits declined 14.8% to 121,000 and housing completions fell 16.5% to 106,000.
In the Midwest, housing starts rose 5.3% to 220,000; building permits fell 4.2% to 200,000 and housing completions rose 41.1% to 278,000.
In the South, housing starts declined 13% to 667,000; building permits fell 15% to 691,000 and housing completions fell 24.4% to 815,000.
In the West, housing starts rose 6.5% to 313,000; building permits fell 3.8% to 300,000 and housing completions rose 14.6% to 409,000.
The rise in housing completions in the West and Midwest could prove a boost for those regions as families moved into those homes before the new school year. That could explain why August was such a good month for a number retailers Home News Now spoke with following the Labor Day holiday weekend.
An increase in housing starts in both regions also could boost interest in furniture among new home buyers in the coming months, although some of those sales might not take place for several months, or until the homes are closer to completion.
Conversely, declines in housing completion activity in the South and Northeast could have impacted sales in some of those regions. Double-digit declines in housing starts also could impact furniture sales in the months ahead, although that too could depend on any additional efforts the Fed makes to lower rates further between now and the end of the year.
The NAHB offered an optimistic assessment for the home building sector amid the latest rate cut.
“With the Fed expected to reduce the federal funds rate later today, this return to monetary policy easing will help the mortgage market indirectly and lead to lower interest rates for building and land development loans, which will help builders to boost housing production,” said NAHB Chief Economist Robert Dietz.
