The U.S. Census Bureau recently reported housing starts fell in August for the second month in a row. Homebuilding was down by 0.8% in August, slipping to a seasonally adjusted annual rate of 1.18 million new properties. This comes after a similar decline in July.
However, the report also showed building permits increased by 5.7%. This increase brought permits to 1.30 million units in the month of August, signaling there may be a surge in new homebuilding and a need for conventional mortgages for homebuyers over the coming months. The 5.7% rise brings building permits to their highest level since January.
The data presented a mixed outlook for homebuilding for the rest of 2017, as homebuilding was up 1.4% in August compared to August 2016. Single-family building increased by 1.6% last month, with a total of 851,000 units in the process of being built. As these home are being built, single-family permits dropped 1.5% in August. The gap in permits being granted may slow building progress during the end of 2017 and the beginning of 2018.
Natural disasters will also likely have an impact on housing data in the coming months. Hurricane Harvey wreaked havoc in Texas in August, while Hurricane Irma caused destruction across Florida and the East Coast, which may slow building projects as these areas recover. Although construction will likely pick up again soon, these states may also be facing labor shortages due to the storms, as workers make their way home to reconstruct their own lives. There will also be increased competition for hiring as construction crews will be in demand for home repairs.
Brad Hunter, chief economist at HomeAdvisor, told Forbes that project requests for services such as water removal, roof repair and window replacements increased 78% over the two weeks following the storms.
"Overall, there is no question - the labor shortage in construction and remodeling just got worse," Hunter said. "The back-to-back devastating hurricanes have exacerbated the already-existing labor shortages in the construction and remodeling industry, particularly in Florida, Texas and South Carolina."
The multi-family unit housing sector faced significant challenges in August. Starts in this segment fell by 6.5% to 329,000 units last month. However, it seems there may be improvements to this sector in the future, as multi-family permits increased by 19.6% to a rate of 500,000 units in August.
Most economists project that the housing market will continue to make gains in the long term and will recover from the setbacks caused by the storms. David Berson, chief economist at insurance company Nationwide, told Forbes he expects housing to continue to make gains this year.
"The trend in housing starts should continue to be upward over the remainder of this year and in 2018, as housing demand rises - boosted by the solid job market, wage gains that are edging higher, low mortgage rates and accelerating household formations," Berson said.
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