Falling Housing Permits Steal Luster of September Starts Rise

Despite big numbers, mixed report means housing remains mostly flat

Bottom Line

  • Housing starts jumped 15.0% in September to a 658,000 annual rate—the best reading in 17 months. Starts posted solid gains in all four regions.
  • Single-family starts were up 1.7%; multi-family starts jumped a whopping 51.3%. 
  • Housing permits (which matter more than starts) fell 5.0% to a 594,000 annual rate—lowest reading in five months.
  • Single-family and multi-family permits were down 0.7% and 14.5%, respectively.


For this report, permits matter more than starts because they are much better measured, less affected by unusual weather (such as hurricanes) and are forward looking. 

Single-family permits were down slightly in September, remaining at depressed levels. They were down in three of four regions. They remain depressed and trendless nationally and in all four regions.

Multi-family permits dropped 14.5% to a 177,000 annual rate. Since this statistic is volatile, one should not make too much of a one-month drop, especially since the multi-family market, according to most indicators, is improving. Added up, total permits were down—indicating that housing starts are likely to drop in October or November.

Housing starts posted double-digit gains in three of the four regions (the Midwest, where starts were up only 9.2%, was the exception). Multi-family starts were up 51% nationally, propelled forward by a 141% jump in the South and a 52% increase in the West. Although multi-family starts were soaring in these two regions in September, multi-family permits in both regions were down significantly, indicating that the gain in starts will probably reverse sharply in October or November.

On balance, this was a mixed report. The increase in starts is good for GDP growth and jobs. The drop in permits indicates that September’s gains are not sustainable. The report does not change the current direction of the housing market—a flat single-family market and a slowly improving multi-family market.