US new home construction jumps 10.5% in August

21 September 2010 14:54  [Source: ICIS news]

A US home under constructionWASHINGTON (ICIS)--US new home construction rose by 10.5% in August from July, the Commerce Department said on Tuesday, including a strong 4.3% increase in new single-family residences, considered the core segment of the overall housing industry.

The upturn in single-family builds would be welcome news to home builders  and to many supplier industries and labour interests  because it is the first sign of positive growth in months for the long-struggling construction industry.

New home construction, especially single-family housing, has been in a nosedive since the federal tax credit stimulus programme for home buyers expired in April of this year.

In its monthly report on housing construction, the department said that housing starts in August were at a seasonally adjusted annual rate of 598,000 units, an increase of 57,000 (or 10.5%) compared with building activity in July.

Within that overall residential construction figure, single-family housing starts were at 438,000 in August compared with the July figure of 420,000, a gain of 18,000 units (or 4.3%).

However, one-family residential construction work in August was 9.1% below the level of activity seen in August 2009, when the federal stimulus programme was still in force.

New construction work for multi-unit apartment buildings saw even sharper gains in August, the department said, increasing by 42.7% from July.

But gains in apartment building construction are seen as an indicator of continuing stress in the housing sector, because demand for rental apartments increases as more owners lose their homes to foreclosure. That in turn means there are more vacant existing homes on the market to compete with new construction.

The housing market is a key downstream consumer sector for the chemicals industry, driving demand for a wide variety of chemicals, resins and derivative products such as plastic pipes, insulation, paints and coatings, adhesives, roofing materials and synthetic fibres, among many others.

The American Chemistry Council (ACC) estimates that each new home built represents some $16,000 (€12,320) worth of chemicals and derivatives used in the structure or in production of component materials.

The department said that building permits for new residential work also saw gains in August from July, rising to 569,000 construction authorisations (seasonally adjusted and annualised), an increase of 1.8% from the prior month’s revised figure of 559,000.

Single-family housing permits also showed an advance, rising to 401,000 in August from the revised July figure of 406,000, a gain of 1.2%.

Building permits are issued by local governments when contractors are ready to break ground and begin construction of a residential structure, so monthly permitting data are seen as a real-time indicator of the housing sector’s near-term prospects.

The gains in housing starts and building permits for August came in the wake of strongly negative trends.

Single-family housing starts fell by 4.2% in July, and overall residential construction had dropped by 5% in June and by 10% in May following the end of the federal stimulus.  New home sales had fallen in July to an all-time low.

The August upturn, especially the gain in the core single-family construction sector, may put to rest fears that the housing industry could be headed for a double-dip recession.

The August improvement suggests to analysts that there may be enough fundamental demand in the marketplace to eventually revive the housing industry without federal tax incentives.

US Housing Starts

  Aug ’10

  July ’10

  July-Aug ’10

   Aug ’09

Aug ’09 to   Aug ’10

US Housing Starts






* Seasonally adjusted & annualised

($1 = €0.77)

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