Apartment-sector plunge drags down home building

WASHINGTON U.S. home construction plunged in August, led by steep decline in the volatile apartment category. But single-family house construction, a larger and more stable portion of the market, fell only modestly.

Construction fell 14.4 percent in August to a seasonally adjusted annual rate of 956,000 homes, the Commerce Department said Thursday. This reverses the sharp gains in July when the rate of new construction rose to 1.12 million homes, the highest annual rate since 2007.

Last months decrease primarily came from builders starting fewer apartment complexes, which plummeted 31.5 percent compared to July. Apartments have propelled much of the growth in residential construction over the past year, but the pace has been volatile from month to month. Apartment starts surged 51 percent in July.

In August, the building of single-family houses fell 2.4 percent.

Applications for building permits, a sign of future activity, dipped 5.6 percent to an annual rate of 998,000.

In the Twin Cities area, permits for new single-family houses declined 15 percent in August from a year earlier, and permits for new multifamily units were down 78 percent. But two large apartment projects permitted in August of last year make it appear as if multifamily construction is plunging. Apartment units for the year to date are still running 8 percent ahead of the same period in 2013.

Single-family permits in the Twin Cities, however, are down 5 percent for the year to date.

Local homebuilders pulled permits for 531 new housing units in August, down from 1,173 in August 2013, according to the Keystone Report, which tracks residential permits in the 13-county area. Of the 531 new units, 394 were single-family houses and 138 were multifamily units.

Nationally, apartment construction has surged 19.2 percent in the past 12 months. Meanwhile, single-family starts have risen just 4.2 percent. The shift among builders to increased apartment building is a sign that a rising share of Americans will be renters, rather than homeowners.

Jed Kolko, chief economist at the real estate firm Trulia, said that builders are already constructing too many single-family houses. The vacancy rate for these homes was 10.7 percent in 2013, compared to 7.4 percent in 2000, according to the Census.

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Apartment-sector plunge drags down home building