The Census Bureau and the U.S. Department of Housing and Urban Development said that new housing starts jumped to a one-year high in October, bouncing back from hurricane-related softness in the prior release. New residential construction rose 13.7 percent from 1,135,000 units at the annual rate in September to 1,290,000 units in October, its fastest pace in 12 months. That is encouraging news, and yet, it is worth noting that the bulk of that increase stemmed from better multifamily activity, which can often be highly volatile from month to month. Multifamily housing starts soared from 302,000 to 413,000 in this release, the best reading since January. New single-family construction was also higher, up from 833,000 to 877,000, an 8-month high.
Despite the strong gain in the latest figures, new housing starts were actually 2.9 percent lower than 12 months ago, with activity at 1,328,000 units in October 2016. To be fair, last year’s reading was a significant outlier, with housing starts averaging 1,177,250 units in 2016 as a whole. The difference stemmed mostly from multifamily activity, which was 9.6 percent lower in this current data than at this point last year. In contrast, new single-family starts have largely trended in the right direction, averaging 841,300 year-to-date in 2017 versus 778,200 in the same time period in 2016.
Fortunately, housing permits remain highly elevated. Residential permits increased from 1,225,000 units in September to 1,297,000 in October, its fastest rate since January. Permits are a proxy of future activity and have now exceeded 1.2 million units in 13 of the past 14 months. That bodes well for strong growth moving forward. This is consistent with optimism from the home builders, which was released yesterday and rose to its second-best reading since July 2005. Single-family permits were at levels not seen since September 2007, up from 823,000 to 839,000. At the same time, the bulk of the increase in October came mostly from the highly volatile multifamily segment, up from 402,000 to 458,000.
On a year-over-year basis, multifamily permits edged up 0.9 percent, up from 1,285,000 units in October 2016. Single-family permitting increased 7.7 percent over the past 12 months, but this was offset by a decline of 9.5 percent year-over-year for multifamily permits.