Builders broke ground on fewer houses and apartment complexes in August, a possible sign that the housing market may be leveling off after accelerating for much of the year.
The Commerce Department said Thursday that housing starts last month fell 3 percent to a seasonally adjusted annual rate of 1.13 million homes. Construction activity slowed sharply in the Northeast and Midwest.
The August report, however, still beat economists expectations that starts last month would fall 3.8 percent, according to a survey by data firm FactSet. August starts slipped from a pace in July that at 1.21 million was the highest since November 2007.
Homebuilding appears much stronger than a year ago, despite figures that can be highly volatile on a monthly basis.
"This is a mere blip on the radar," said Tom Wind, executive vice president of home lending at EverBank. "The housing market's underlying fundamentals remain on pace for continued recovery."
Housing starts have climbed a solid 11.3 percent this year to date. Steady job gains of 2.9 million in the past year are contributing to increased demand from buyers and renters, as home construction has begun to fuel further economic growth. Builders last month continued to prepare for the influx by filing more construction permits.
Approved permits rose 3.5 percent in August to an annual rate of 1.17 million.
Indeed, the real estate market has accelerated through much of 2015. More than six years into the recovery, construction of houses and apartment complexes have returned to levels last seen in late 2007, shortly before the recession began and decimated the market. Steady job gains contributed to rising demand for housing, often surpassing the ability of builders to bring more homes onto the market.
Builders have stepped up their construction plans as sales of existing homes and apartment prices have soared. Total housing starts have climbed 11.3 percent year-to-date, while sales of existing homes have jumped this summer to the highest level since February 2007.
At the same time, median rental prices are rising annually at 4.2 percent -- roughly double the increase in average hourly wages -- because of an influx of downsizing baby boomers and millennials entering the job market.
The demand is coming in part because the U.S. will add the equivalent of Illinois' population -- 12.9 million people -- to the housing market in the next five years, said Robert Hart, chief executive of TruAmerica, a Los Angeles-based firm that renovates and manages apartment buildings.
As younger Americans enter the housing market, they're renting longer before buying, held back by student debt and a lack of down payment savings. The share of the country owning homes has tumbled to 63.4 percent, the lowest level in 48 years.
"People are delaying ownership until they're on a more solid ground -- personally and professionally," Hart said. "The demand is coming across the demographic spectrum," he said, describing the change as a "tectonic movement."
Builder confidence is also improving.
The National Association of Home Builders/Wells Fargo builder sentiment index released Wednesday rose this month to 62, up from 61 in August. The last time the reading was higher was October 2005 at 68.
Yet increased construction activity has yet to fully satisfy demand. Only 5.2 months' supply of new homes is listed for sale, well below the standard level of six months usually seen in a healthy market.
But there are also signs that housing activity might soon plateau. The lack of supply has caused prices to shoot up in many of the largest job markets, reducing affordability for potential buyers and renters.
Sales at furnishers and building supply stores fell in August after posting gains over the past 12 months, the government reported Tuesday.