Housing Starts Inched Up in September But Completions Took a Dive

Housing starts October were up 1.5% compared with September but were down 2.9% compared with October 2017, according to estimates from the U.S. Census Bureau and U.S. Department of Housing and Urban Development.

Starts were at a seasonally adjusted annual rate of 1.228 million, up from 1.210 million the previous month but down from 1.265 million a year earlier.

Starts of single-family homes were at a rate of 865,000, down 1.8% compared with 881,000 in September.

Starts of multifamily units (five units or more per building) were at a rate of about 343,000, an increase of 6.2% compared with 323,000 in September.

Regionally, combined single-family and multifamily housing starts increased 13.5% in the West and 5.5% in the South but fell 0.6% in the Midwest and 4.8% in the Northeast.

Building permits were also down – they fell 0.6% compared with the previous month and were 6.0% below the rate seen one year earlier.

That’s a rate of 1.263 million compared with 1.270 million in September and 1.343 million in October 2017.

Permits for single‐family dwellings were at a rate of 849,000 compared with about 854,000 in September. Permits for multifamily units were at a rate of 376,000 – flat compared with the previous month.

Completions also took a dive; they were down 3.3% month-over-month and were down 6.5% compared with a year earlier.

“Today’s Census Bureau report for October sends a negative message to the housing market,” says Mark Fleming, chief economist for First American. “Completions decreased 6.5 percent compared to October of last year, indicating that we are falling short of adding homes to the market in the short-term.

He says the year-over-year drop in completions “signals a slowdown in immediate housing supply relief.”

“Housing starts also decreased 2.9 percent in October compared with a year ago,” Fleming adds. “Most notably, ground breaking for single-family homes fell 2.6 percent compared with last year. However, there was some modest help for home buyers as the inventory of homes under construction increased by 3.6 percent compared with a year ago, indicating additional new increases in the supply of homes are on the way.”

The overall decrease in permits echoes the most recent homebuilder sentiment survey, which, although positive, fell to the lowest point in almost a year.

“This month’s decrease in single-family starts isn’t a surprise given the drop in our builder confidence index,” says Randy Noel, chairman of the National Association of Home Builders, in a statement. “Builders are showing caution as mounting housing affordability concerns are forcing some consumers to delay making a home purchase.”

“Single-family starts were strong at the beginning of the year, but weakened this summer and have remained soft,” adds Robert Dietz, chief economist for NAHB. “Despite this softness, 2018 construction volume is set to be the best since the downturn. A growing economy and positive demographic tailwinds are supporting housing demand as interest rates rise. However, policymakers should take note of the November decline in builder confidence as a sign that housing affordability conditions will weigh on the housing market going forward.”

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