Led by a surge in multifamily production, total housing starts rose 12.3 percent in August to a seasonally adjusted annual rate of 1.36 million units from an upwardly revised reading in July, according to a report from the U.S. Housing and Urban Development and Commerce Department. This is the highest level since May 2007.

The August reading of 1.36 million starts is the number of housing units builders would begin if they kept this pace for the next 12 months. Within this overall number, single-family starts increased 4.4 percent to 919,000 units. The multifamily sector, which includes apartment buildings and condos, jumped 32.8 percent to a 445,000 pace.

“This solid report is in line with our latest survey on builder sentiment,” said Greg Ugalde, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Torrington, Conn. “However, builders continue to wrestle with affordability concerns stemming from excessive regulations and other supply-side challenges.”

“Housing has been on an upswing in recent months as the pace of permits and starts has been rising since spring,” NAHB Chief Economist Robert Dietz. “While these are positive developments, single-family starts are down 2.7 percent year-to-date as the catch up process continues.”

On a regional and year-to-date basis, combined single-family and multifamily starts in August rose 4.4 percent in the South. Starts declined 1.8 percent in Northeast, 5.6 percent in the Midwest and 11.3 percent in the West.

Overall permits, which are a harbinger of future housing production, increased 7.7 percent to a 1.42 million unit annualized rate in August. Single-family permits increased 4.5 percent to a 866,000 rate while multifamily permits rose 13.3 percent to a 553,000 pace.

Looking at regional permit data on a year-to-date basis, permits rose 5.7 percent in the Northeast and 1.6 percent in the South. Permits fell 6.9 percent in the Midwest and 5.6 percent in the West.

Builder confidence in the market for newly-built single-family homes rose one point to 68 in September from an upwardly revised August reading of 67, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI) released today. Sentiment levels have held in the mid- to upper 60s since May and September’s reading matches the highest level since last October.

“Low interest rates and solid demand continue to fuel builders’ sentiments even as they continue to grapple with ongoing supply-side challenges that hinder housing affordability, including a shortage of lots and labor,” said NAHB Chairman Greg Ugalde, a home builder and developer from Torrington, Conn.

“Solid household formations and attractive mortgage rates are contributing to a positive builder outlook,” said NAHB Chief Economist Robert Dietz. “However, builders are expressing growing concerns regarding uncertainty stemming from the trade dispute with China. NAHB’s Home Building Geography Index indicates that the slowdown in the manufacturing sector is holding back home construction in some parts of the nation, although there is growth in rural and exurban areas.”

Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

The HMI index gauging current sales conditions increased two points to 75 and the component measuring traffic of prospective buyers held steady at 50. The measure charting sales expectations in the next six months fell one point to 70.

Looking at the three-month moving averages for regional HMI scores, the Northeast posted a two-point gain to 59, the West was also up two points to 75 and the South moved one point higher to 70. The Midwest was unchanged at 57.

Editor’s Note: The NAHB/Wells Fargo Housing Market Index is strictly the product of NAHB Economics, and is not seen or influenced by any outside party prior to being released to the public. HMI tables can be found at nahb.org/hmi. More information on housing statistics is also available at housingeconomics.com.