Residential Construction Lower on Hurricanes: Trends Remain in Place


Information released jointly by the Department of Housing and Urban Development and the Census Bureau indicates that total housing starts fell by 4.7 percent reflecting a 4.6 percent decline in single-family starts and a 5.1 percent drop in multifamily starts. This release reflects three dynamics, the impact of the recent hurricanes, the continued national trend growth in single-family starts, and the continued softening nationwide in the level of multifamily production.

On a monthly basis, the nationwide decrease in single-family starts reflected a 15.3 percent drop in single-family starts in the South. However, single-family starts in the other three regions of the country recorded month-over-month increases. Despite the national decline in the monthly level of single-family output, year-to-date, covering the first 3 quarters of 2017, single-family starts are 9.1 percent ahead of its pace over the same period in 2016. Moreover, positive growth on a year-to-date basis is taking place in each of the four regions of country. The pace of growth over 2017 relative to the same period in 2016 is consistent with the annual rate of growth in 2015 relative to 2014, 10.3 percent, and in 2016 relative to 2015, 9.4 percent.

The pace of single-family starts reflects net builder sentiment. On net, builders continue to express optimism about the housing market. Despite a 3 point decline in September, the NAHB/Wells Fargo HMI was at 64. In October, the HMI rose 4 points to 68. Any Index reading above 50 indicates that more builders view conditions as good than poor. In recent years, the trend in single-family starts has tracked this measure of builder sentiment. With a tight inventory of existing homes and promising growth in household formation, the new home market will continue to strengthen at a modest rate in the months ahead.

Multifamily starts declined by 5.1 percent over the month of September to 298,000 units. Multifamily starts are calculated as the residual between total starts and single-family starts and is one reason why monthly changes can be volatile. The national decline in multifamily starts were reflected in the Northeast, 35.0 percent, and in the Midwest, 64.6 percent. In the South, multifamily starts rose by 18.1 percent, but had declined by 29.1 percent in August. In the West, multifamily starts rose by 33.3 percent.

On a year-to-date basis as implied by the release, multifamily starts nationwide are 9.2 percent below their level over the first 9 months of 2016. The decreasing pace is taking place across three of the four regions of the country. To date in the West, multifamily starts are 4.3 percent ahead of their pace over the same period one year ago. After increasing by 11.8 percent in 2015 relative to 2014, multifamily starts recorded its first post-recession decline, of 1.3 percent, in 2016.

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