The US housing market reported solid gains in permits and starts in August, a surprise uptick that could portend further gains in construction after the Federal Reserve today lowered borrowing costs for the first time in four years.
Housing starts grew solidly in August, with the seasonally adjusted annual rate for privately-owned housing starts reported at 1.356mn units, still marking only a fourth monthly gain so far this year. The figure was 9.6pc higher than July's revised rate and 3.9pc higher than August 2023. Single family housing grew to a rate of 992,000 units in August, 15.8pc higher than July and 5.2pc higher than August last year.
At the same time, permits also grew from July to August, with August's annual rate for privately-owned houses of 1.475mn units representing a 4.9pc increase from the revised July figures. However, they remained 6.5pc below August 2023. Single-family authorizations were at a rate of 967,000 in August, 2.8pc higher than July but 0.5pc below August 2023.
On 18 September, the Federal Reserve cut its target interest rate by 50 basis points, the first rate cut since 2020. Officials signaled the potential for another half point cut by the end of 2024, with another full percentage point cut penciled in for 2025, all cuts in borrowing costs that will continue to help bring 30-year mortgage rates lower from multiyear highs of nearly 7.8pc seen in late 2023. The cut lowered the federal funds rate to 4.75-5pc from the prior range of 5.25-5.5pc, a two-decade high.
PU sentiment
Polyurethane (PU) demand in the construction sector had continued strong but steady demand in August while supply balanced after a period of tightness, according to market participants. The building blocks of polyurethanes, such as isocyanates like polymeric MDI (PMDI), go into insulation, roofing applications and carpet underlay.
After some supply constraints earlier in the summer the market was working towards a balanced state in August with all production issues having been resolved. Some market participants saw a small bump up in demand during August, but for the most part demand was steady.
Price increase announcements were heard for August PMDI contracts due to steady demand and the supply situation. Argus assessed August PMDI prices up by 3¢/lb from July as partial price increases were heard passing through for the month.
