The Census Bureau and the U.S. Department of Housing and Urban Development said that new residential construction rose from 863,000 in September to 894,000 in October. To put the current figure in perspective, it represents a 22.8 percent increase in housing starts in the past three months. With that said, October’s reading exceeded expectations, which were for starts around 840,000. The longer-term trend of growth continues move upward with year-over-year gains of 41.9 percent.
The improvement in October stemmed entirely from increased multi-family residential construction, up from 268,000 to 300,000 for the month. This is the highest start rate for multi-family units since July 2008, continuing its slow-but-steady advance higher, up from 177,000 in December 2011. Meanwhile, single-family construction was essentially flat, down from 595,000 to 594,000. Despite being unchanged for the month, single-family starts are up 35.3 percent year-over-year and remain at levels not seen since mid-2008.
At the same time, housing permits pulled back a little from the significant gains seen the prior month, down from 890,000 in September to 866,000 in October. Still, this is higher than the 801,000 observed in August, or the 723,000 seen six months ago in April. The trend in housing permits, in other words, remains a positive one. Year-over-year growth in permits is 29.8 percent.
The decline in October stemmed from fewer multi-family permits (down from 340,000 to 304,000); whereas, single-family unit permitting rose for the month (up from 550,000 to 562,000). As with the starts numbers described above, the single-family permitting level is the highest point since July 2008.
Overall, these numbers suggest that the housing market continues to recover, with starts quickly approaching the 900,000 threshold. This remains well below the residential construction levels seen during the housing bubble years when starts hovered around 2.1 million units. But, it is a long way from the 500,000 to 600,000 unit range that the sector stayed in for nearly three years starting in 2009. (As recently as August 2011, housing starts were 581,000.)
Such progress is good for the housing sector and for manufacturers with strong ties to the construction and furnishings industries. And, it is also good for the macroeconomy as a whole. As noted yesterday by National Association of Home Builders Chief Economist David Crowe, though, we still have some major headwinds, including tighter lending standards and financial challenges for many buyers, which are holding back even-stronger growth.
Chad Moutray is chief economist, National Association of Manufacturers.