September Housing Starts Decline on Multifamily Weakness

The September pace of total housing starts decreased 9% due a substantial decline in multifamily production. Single-family construction continues, as expected, along a positive trend.

According to estimates from the Census Bureau and the Department of Housing and Urban Development, single-family starts increased 8.1% to a 783,000 seasonally adjusted annual rate in September. Year-to-date, single-family housing starts are running almost 10% higher than the year-to-date total for September of 2015.

Single-family permit growth points to additional growth. On a year-to-date basis, single-family permits from January to September of 2016 are more than 8% higher than this time in 2015.

Multifamily starts (units in 2+ properties) posted a large decline in September after a few months of strength. Apartment construction starts declined 38% in September to a seasonally adjusted annual rate of 264,000. Multifamily permits on a year-to-date basis are about 11% lower than this time in 2015.

Taken together, these trends are consistent with the NAHB forecast, which sees gathering strength for single-family construction and a leveling off of multifamily production as the market finds a balance between housing demand and supply.

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Regionally, single-family starts showed strength in the Northeast, increasing 20%% on a monthly basis. Gains for single-family starts were also realized in the South (12%) and Midwest (6%). The West posted a slight drop of 2% after a strong August.

On a year-to-date basis, however, all regions have posted gains. Single-family starts are up 12% in the Northeast, 12% in the Midwest, 8% in the South and 6% in the West when comparing the September 2016 year-to-date total relative to the comparable September 2015 year-to-date totals.

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Taking the long view, an examination of the count of homes currently under construction provides the degree of market mix and momentum of the recovery in home construction. As of September, 58% of units under construction in the nation were multifamily (605,000). The count of 605,000 is a 13% gain over a year earlier.

There were 433,000 single-family homes under construction in September, which is 9% higher than September 2015. This is the highest count since October 2008 and is an indicator that growth in home construction is a key bright spot in the overall economy.



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