September Housing Starts Up


September housing starts were up 15% but the increase was almost entirely within the multifamily sector. Single-family starts increased a modest 1.7% to 425,000, essentially the same as the second and third quarter averages. Multifamily starts (2 or more units in a structure) roared ahead 51.2% to 233,000, the highest in three years. Some of the increase was due to a below trend August number, but the sudden surge is likely a product of some expected increase due to the greater demand for rental apartments as well as greater statistical variance. The start of a multifamily structure can account for multiple units so one large building started just after (or before) the month change can push the monthly figures up (or down) more than justified.
The relative sameness in single-family was expected given the slow growth in the economy and the lack of significant job growth. Slow purchase mortgage origination trends and consumer confidence measures have predicted the trend, notwithstanding historically low mortgage rates. NAHB’s single-family forecast had second and third quarters even but with some lift coming in the fourth quarter of 2011. So far, that has proven to be correct.
Permits were level for single-family construction but down for multifamily as builders drew down their stock of unused permits to allow for the burst in construction. Both are likely to increase in October as the number of improving markets increases.
Regionally, the results are mixed but are primarily corrections from earlier dips or bursts from trend. Northeast and Midwest regional single-family starts rose 21% and 46% respectively but both were below trend in August. The South region saw single-family starts decline 9% but August was up 7%. The second quarter to third quarter change was a more trend-like 1.8% increase. The West region single-family starts were unchanged.
The one worrisome data point in the Census/HUD release was a consistent drop in single-family completions. All four regions saw a fall in the number of homes completed. Nationally, the 428,000 completions (seasonally-adjusted annual number) was a 12% drop from August and came after three months above 450,000. This could be an early sign of builders pulling back on future deliveries, or just a momentary pause as they reassess demand.

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