Housing starts increased 4% in November to a 555,000 seasonally-adjusted annual level. The increase was led by a 7% increase in single-family starts and tempered by a 9% fall in multifamily construction. Single-family permits also increased 3% and the increase was consistent across three census regions. Only the West saw a statistically insignificant fall in single-family permits.
The increases in single-family starts and permits are consistent with a very low inventory of unsold new homes and small buoyancy in the expectation component of the NAHB/Wells Fargo Housing Market Index (HMI). The expectation component is up 7 points from its low in September with the December level at 25. The unsold inventory of new homes remains at the lowest level in 42 years, but with expectations for some job recovery and improvement in the economy appearing more likely, the stage is set for further improvement.
Multifamily permits and starts declined from upwardly revised estimates for September and October, making the decline in November even greater. The more volatile multifamily permits declined 23% to 114,000 on a seasonally-adjusted annual level and last seen when an all-time record low 108,000 rate was recorded in July and October 2009. November multifamily permits now stand at the third lowest recorded. Three regions were responsible for the decline with a whopping 77% decline in the Midwest and a 32% decline in the Northeast.
While the multifamily data has greater volatility, the dramatic change from what had been a steady increase from early 2010 through September is unexpected. Completions of multifamily buildings fell 31% but that is more likely to be a result of the low level of starts 12 to 24 months prior. The decline in starts and permits could suggest some added slow down in bringing units to the market as the job market continues to be unresponsive or it could be continued difficulty in obtaining financing to build.