WASHINGTON, Sept 17 (Reuters) – US single-family homebuilding increased in August, but a drop in permits for future construction suggested the improvement was likely temporary as rising inflation because of the war in the Middle East boosts mortgage rates.
Single-family housing starts, which account for the bulk of homebuilding, jumped 7.6% to a seasonally adjusted annual rate of 918,000 units last month, the Commerce Department’s Census Bureau said on Thursday. They rose 5.2% on a year-over-year basis in August.
Single-family building permits fell 1.8% to a rate of 878,000 units in August. They increased 1.3% on a year-over-year basis.
Mortgage rates have surged, tracking longer-term US Treasury yields as the US-Israeli war with Iran drove oil prices above $100 a barrel. Bond yields have also risen amid uncertainty over the Federal Reserve’s response to inflation and a ballooning national debt. The yield on the benchmark 10-year Treasury note is hovering around 5.0%.
The US central bank on Wednesday raised interest rates for the first time since 2023 and flagged further increases in borrowing costs in the months ahead. The Fed’s overnight benchmark interest rate was raised by a quarter of a percentage point to the 3.75%-4.00% range.
The average rate on a 30-year fixed-rate mortgage was 6.76% last week, the highest level in more than a year, up from 6.71% in the prior week, data from mortgage finance firm Freddie Mac showed.
A National Association of Home Builders survey on Wednesday showed sentiment among single-family homebuilders slumped to a one-year low in September. The weakness was blamed on rising mortgage rates as well as worsening labor shortages because of an immigration crackdown and higher prices for materials amid import tariffs.
Starts for housing projects with five units or more, a very volatile segment, plunged 22.5% to a rate of 344,000 units in August. Multi-family housing starts decreased 15.5% on a year-over-year basis. Overall housing starts fell 2.6% to a pace of 1.275 million units. They decreased 1.2% on a year-over-year basis in August.
Building permits for multi-family housing projects dropped 3.1% to a rate of 467,000 units last month. Overall building permits fell 2.7% to a rate of 1.394 million units. They increased 3.5% on a year-over-year basis in August.
(Reporting by Lucia Mutikani; Editing by Paul Simao)
