***Eye on the Economy is a biweekly survey of NAHB’s economic and housing analysis from Chief Economist David Crowe.
Contracts for new home sales disappointed in September, after a strong August and a run of weak job numbers. According to estimates from the Census Bureau, the monthly pace of new home sales declined 11.5% from August, falling from a 529,000 seasonally adjusted annual rate to 468,000.
Despite the stumble in September, builders remain confident about the market. In fact, the NAHB/Wells Fargo Housing Market Index for October jumped three points from a one-point downwardly revised September. The October level of 64 conforms to levels last seen in late 2005. Any value higher than 50 means the majority of builders see the market getting better as opposed to worse. Even with headwinds in the supply chain, builders still report increasing consumer interest in buying a home.
Housing starts in September rose 6.5% to an eight-year high of 1.206 million units on a seasonally adjusted annual basis. The increase was all in the multifamily sector, rising 18.3% to 466,000. Single-family starts were effectively unchanged at 740,000. This is the first month since October 2007 in which total starts passed the 1.2 million annual pace.
Permits were down 5%, but that change was also due entirely to the multifamily sector. Single-family permits were virtually unchanged at 697,000, while multifamily permits fell 12.1% to an annualized rate of 406,000.
Access to workers continues as a supply-side headwind pushing against sector growth. In September, the number of jobs in home building and remodeling (seasonally adjusted) increased by only 3,900 positions. The pace of hiring for the industry has slowed over 2015, with the average monthly employment gain standing at just over 5,500 over the last six months. As hiring has slowed, the number of unfilled jobs in the overall construction sector has been trending up.
There was mixed news for building material prices. Among wood products, softwood lumber prices reversed the modest increases from June and July, declining 3.5% in September and 8.5% since January. OSB prices rose 3.3% in September, potentially ending the long slide that followed the collapse in early 2013. Gypsum prices edged up 0.6% in September after modest declines through the year. Potentially reversing the slide, major producers announced a fresh round of gypsum-product price increases for the end of this year and through 2016.