The Census Bureau reported that housing starts fell by 2,000 in October to 628,000 residential units. There are several pieces of good news, though, in these numbers. First, housing starts remained above the 600,000 psychological threshold for the second month in the row – something that has been a challenge in previous months. Second, single-family housing led the way, with single–family starts up 3.9 percent and permits increasing by 5.1 percent. Indeed, the real positive news in today’s report is the jump in housing permits, from 589,000 in September to 653,000 in October. This is hopefully a sign of increased activity as we move into the end of this year and the beginning of 2012.
Multi-family housing starts were down from 216,000 in September to 198,000 in October, but it was still a solid figure and one of the highest of the past few years. As a sign of continued strength in this sector moving forward, multi-family housing permits were up by 43,000 to 219,000 units.
Overall, these numbers paint a picture of a housing sector that is trying to gain some traction for a rebound. A number of headwinds remain in the way, as has been well-documented, including a continued overhang of inventory, rising foreclosures, difficulty obtaining credit, and a still-weak domestic economy. Nonetheless, while it still has a long way to go and we should expect the process to be a slow one, today’s report is still a good sign.
These figures were consistent with new Housing Market Index (HMI) data from the National Association of Home Builders (NAHB) and Wells Fargo, which were released yesterday. The HMI rose three points from 17 in October to 20 in November, mostly on the strength of single-family home construction. All regions of the country, except for the West, experienced gains. Moreover, the index for potential buyer traffic also ticked higher to its highest point since May 2010.
In its press release, the NAHB both praised the positive gains in the index while also noting the continuing challenges still facing the industry. NAHB Chief Economist David Crowe said, “This second consecutive gain in the HMI is evidence that well-qualified buyers in select areas are being tempted back into the market by today’s extremely favorable mortgage rates and prices.”
And yet, the Chairman of the NAHB Bob Nielson, a home builder from Reno, Nevada, added the following: “While this second solid monthly gain on the builder confidence scale is encouraging, the overall measure remains quite low due to the many challenges that home building continues to face with regard to the high number of foreclosures, the difficulties of obtaining construction financing and accurate appraisals, and the restrictive lending environment that is discouraging potential buyers.”
Chad Moutray is chief economist, National Association of Manufacturers.