The U.S. housing market got a much-needed boost on Tuesday as the government’s report on August housing starts rose at the unexpectedly strong rate of 10.5%, its highest level in four months.
Specifically, building starts for privately owned homes last month rose a seasonally adjusted 10.5% above the revised July estimate of 2.2%, the U.S. Commerce Department reported. Housing starts, which totaled 598,000 nationwide in August, were 2.2% above the August 2009 rate of 585,000.
Economists’ consensus was for 550,000 more units this August, according to a Thomson-Reuters poll.
“Housing starts showed unexpected strength in August with even the single-family component increasing,” according to a Nasdaq news report. “The August annualized pace of 598,000 units clearly topped analysts’ expectations for 550 million units and is actually up 2.2% on a year-ago basis.”
Despite the strong data, the housing market must be viewed with caution, said the North American economics group at Bank of America Merrill Lynch Global Research in an analyst note.
“Although the headline looks good, the details of the report paint a more downbeat picture. The gain in starts was largely due to a 32% pop in multi-family starts, which tend to be incredibly choppy on a monthly basis,” the group wrote. “Typically, such big swings in one direction will be quickly reversed, suggesting we should expect a sharp drop in multi-family starts over the next few months.”