Housing Production Takes a Breather

Housing starts fell 3% in November but from an elevated level in September and October. Single-family starts declined 4.1% also adjusting from what may have been a momentary surge in September and October as builders try to restock very low inventory levels. The interpretation is further supported by a 3.6% rise in permits, an indicator of future construction activity.

 
The first two months of the fourth quarter have averaged 875,000 starts up 13% from 774,000 in the third quarter. Single-family construction is up 6% and multifamily up 30% last two months compared to third quarter.

 
The mix between single-family and apartment construction was also uneven. Multifamily apartment construction continued on the rise with units in buildings with 2 or more homes rising to 296,000 on a seasonally-adjusted annual basis. And, permits for the same category rose to 334,000 or 10.6% above their October level. The demand for rental apartments has and will continue to support increases in this sector.

 
Single-family starts were mixed across regions rising in three regions but falling in the West. The east coast Sandy storm did not appear to affect total starts in the region, which fell 4,000 while US starts were down 27,000 (both on a SAAR basis).

 
The mixed results of single-family starts down but single-family permits virtually level support the conclusion of a pause rather than any suggestion of softness. Many hurdles remain, including access to credit, poor appraisals and competition with distress sales but the most likely path continues to be modest growth supported by low mortgage rates and a slowly recovering labor market.

Regional Housing Starts



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