Housing Starts Fell Much Further than Expected in Storm-Ravaged September

Total U.S. housing starts in September fell by 4.7% -- much steeper than theTotal U.S. housing starts in September fell by 4.7% – much steeper than the consensus forecast of -0.4% – to a seasonally adjusted annual rate of 1.127 million. Permits fell 4.5% in September but remain nearly 8% above starts. consensus forecast of -0.4% – to a seasonally adjusted annual rate of 1.127 million. September’s rate of single-family starts dropped 4.6% to 829,000 units, and the pace of multifamily starts fell 5.1% to 286,000. The monthly estimates released jointly by the Department of Housing and Urban Development and the Census Bureau reflects three dynamics:

1. The impact of the recent hurricanes
2. Continued national trend growth in single-family starts
3. Continued softening nationwide in multifamily housing production

August starts were revised slightly higher, taking some of the sting out September’s drop.

Permits fell 4.5% in September but remain nearly 8% above starts, setting the stage for a rebound.

September’s drop in starts underscores the importance of Florida and Houston. Total starts also fell in the Midwest and Northeast. The drop was entirely in apartments as single-family starts were up.

Single-family starts plunged 15.3% in the South, but year-to-date the South is 7.5% ahead of its pace over the same period in 2016. Single-family starts in the other three regions of the country recorded increases for the month, adding to significant year-to-date growth.

The pace of growth in single-family starts through 2017 compared to the same period in 2016 is consistent with annual growth in 2015 relative to 2014 (10.3%) and in 2016 relative to 2015 (9.4%).

Multifamily starts declined by 5.1% over the month of September to 298,000 units, with steep declines in the Midwest and Northeast. Surprising growth in the South, and a big jump in the West didn’t change the steady decline of multifamily construction year to date.

Year to date, U.S. multifamily starts are 9.2% below their level over the first 9 months of 2016. The pace is slowing across three of the four regions of the country, with only the West building starting more multifamily construction than in 2016. After increasing 11.8% in 2015 relative to 2014, multifamily starts recorded its first post-recession decline, of 1.3%, in 2016.

While repairs on damaged homes are not counted as starts, they may impact starts by worsening labor shortages and driving materials prices higher. Some projects may simply be delayed.