Economists expect that residential construction will contribute to economic growth in the third quarter after being a small drag on output in the April-June period.
Demand for housing is being driven by a tightening labor market, which is lifting wages. A survey of homebuilders published on Monday showed confidence hitting an 11-month high in September, with builders bullish about current sales now and over the next six months, as well as prospective buyer traffic.
Groundbreaking on single-family homes dropped 6.0 percent to a 722,000-unit pace in August, the lowest level since last October. With permits for the construction of single-family homes rising last month, single-family home building could rebound in the month ahead.
The single-family housing market is being supported by a dearth of previously owned homes available for sale. Single-family home construction tumbled 13.8 percent in the Northeast and dropped 13.1 percent in the South. Starts rose strongly in the West and Midwest.
Housing starts for the volatile multi-family segment fell 5.4 percent to a 420,000-unit pace. The multi-family segment of the market has been buoyed by strong demand for rental accommodation as some Americans shun homeownership in the aftermath of the housing market collapse.
Momentum could slow with rents appearing close to peaking and rental vacancy rates bottoming.