US new home building drops 5% in August, down 5.8% year on year

20 September 2011 14:31  [Source: ICIS news]

WASHINGTON (ICIS)--US new home construction fell sharply in August, the Department of Commerce said on Tuesday, dropping by 5% from July’s pace and down by nearly 6% from August 2010.

In its monthly report on residential construction, the department said that the number of housing starts in August was at a seasonally adjusted annual rate of 571,000 units, down by 5% from the revised July estimate of 601,000.

August also represented a 5.8% decline from the same month a year ago, when 606,000 housing starts were recorded (also on a seasonally adjusted annual basis).

The August fall-off in new home construction followed a 1.5% decline in July from June.

In addition, within the July home building figures, work on new single-family homes saw a decline of nearly 5%.

Single-family housing is considered the core of the US residential construction market.

Housing construction 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 pipe, 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 (€11,680) worth of chemicals and derivatives used in the structure or in the production of component materials.

There was some better news in the August housing construction data, however, with the department reporting that the number of building permits issued last month rose by 3.2% from July’s pace.

This suggests that the home construction industry might see a much-needed change of direction when September’s housing data are released in October.

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.

While the 3.2% increase in August building permits is seen as a good sign, much of that advance was attributed to a 38% advance in construction authorisations for multi-family apartment buildings, while single-family building permits rose by a more modest but nonetheless positive 2.5%.

The housing construction report comes in the wake of Monday’s news that US housing contractors are more negative about prospects for improvement in the new home building industry.

US Housing Starts

	Aug ’11	July ’11	July-Aug ’11	Aug ’10	Aug ’10 to  Aug ’11
US Housing Starts	571,000*	601,000*	-5%	606,000*	-5.8%

* Seasonally adjusted & annualised

($1 = €0.73)

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