Housing Starts Disappoint Again in September, Partly on Hurricane Impacts

The Census Bureau and the U.S. Department of Housing and Urban Development said that new housing starts fell for the sixth time in the past seven months, down 4.7 percent in September and continuing a disappointing trend in the overall data. New residential construction declined from 1,183,000 units at the annual rate in August to 1,127,000 in September. A fair share of the decline stemmed from the impacts of recent hurricanes, but there was decreases in activity in the Midwest and the Northeast, suggesting some broader softness in the market, especially for multifamily construction. Indeed, housing starts have been weaker than desired year-to-date, drifting lower since peaking at 1,288,000 units in February. With that said, starts have risen 6.1 percent over the past 12 months, up from 1,062,000 units in September 2016.  

Much of the weakness—and month-to-month volatility—in the data have come from the multifamily segment. Indeed, multifamily housing starts were down from 314,000 units in August to 298,000 in September, its slowest pace in one year. Single-family starts have been more encouraging, up 5.9 percent year-over-year and generally trending in the right direction. Nonetheless, new single-family construction starts were also lower in September for the third consecutive month, down from 869,000 units in August to 829,000 in September. The declines in single-family activity in September were entirely in the South, however, down 15.3 percent and highlighting significant negative effects from Hurricanes Harvey and Irma.

On the positive side, housing permits have remained more elevated, albeit also with some deceleration in the latest figures. Residential permits were off from 1,272,000 units in August to 1,215,000 in September and have now exceeded 1.2 million units in 12 of the past 13 months. Permits are a proxy of future activity, so these data suggest strong growth moving forward. In fact, single-family permitting has risen from 800,000 to 819,000, a six-month high. In contrast, multifamily permits declined sharply from 472,000 to 396,000, with the data seesawing wildly from report to report for much of this year.

The drop in multifamily permits helped to push the headline permits figure below the level seen in September 2016, with a year-over-year decline now of 4.3 percent. Single-family residential permits have increased a healthier 9.3 percent over the past 12 months, up from 749,000 units one year ago. As such, the permits data were perhaps more promising than at first glance.

Chad Moutray

Chad Moutray

Chad Moutray is chief economist for the National Association of Manufacturers (NAM) and the Director of the Center for Manufacturing Research for The Manufacturing Institute, where he serves as the NAM’s economic forecaster and spokesperson on economic issues. He frequently comments on current economic conditions for manufacturers through professional presentations and media interviews. He has appeared on Bloomberg, CNBC, C-SPAN, Fox Business and Fox News, among other news outlets.
Chad Moutray

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