Commercial real estate drives August housing activity
Is the easing of monetary policy spurring new housing construction? This week’s chart explores the connection and its potential impact on real estate investment.
September 20, 2019 | 2 minute read
While all eyes were on the Fed’s second rate cut in as many months, this week’s housing market data indicates the recent easing of monetary policy, coupled with a multimonth decline in mortgage rates, may be spurring new housing construction, particularly within the commercial real estate (CRE) market.
Housing starts, which measure new homes currently under construction, rose approximately 12% in August compared to expectations for 5% growth.1 The strong headline number was driven primarily by activity within the multifamily CRE market, where starts jumped 33% in August.1
Building permits, which track plans for new construction activity, rose nearly 8% in August, beating economists’ expectations of a decline of 1.3%.1 Again, permits issued for new multifamily CRE construction, which rose 13% from July, primarily drove permit activity.1
Housing data can be very volatile, and it’s important to keep in mind that short-term gains within the housing market can quickly reverse themselves. However, the uptick in multifamily construction activity, combined with other factors such as a low national vacancy rate, steady rent growth and a likely lower-for-longer rate environment, point to a fundamental backdrop that should support the sector moving forward.