Multifamily Decline Pushes Overall Housing Starts Down in September

Led by a drop in multifamily production, total housing starts fell 5.3 percent in September to a seasonally adjusted annual rate of 1.2 million units, according to newly released data from the U.S. Department of Housing and Urban Development and the Commerce Department.

The September reading of 1.2 million is the number of housing units builders would start if they maintained this pace for the next 12 months. Within this overall number, single-family starts edged down 0.9 percent to 871,000 units. Meanwhile, multifamily starts—which includes apartment buildings and condos—fell 15.2 percent to 330,000.

Overall permits—which are an indicator of future housing production—registered a 0.6 percent drop in September, also due to multifamily softening. Multifamily permits decreased 7.6 percent to a 390,000 unit pace while single-family permits rose 2.9 percent to an annualized rate of 851,000.

“Housing starts are in line with builder sentiment, which shows that builders are overall confident in the housing market but continue to face supply-side challenges,” said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La. “Though lumber prices have declined recently, builders remain concerned about labor shortages, especially as the number of unfilled construction jobs has reached a post-recession high.”

“This report is consistent with our forecast for gradual strengthening in the single-family sector of the housing market following the summer soft patch,” said NAHB Chief Economist Robert Dietz. “A growing economy coupled with positive demographics for housing should keep the market moving forward at a modest pace in the months ahead.”

Regionally in September, combined single-family and multifamily housing starts rose 29 percent in the Northeast and 6.6 percent in the West. Starts fell 13.7 percent in the South and 14 percent in the Midwest.

Permit issuance rose 11.1 percent in the West and 0.6 percent in the South. Permits were down 9.8 percent in the Northeast and 18.9 percent in the Midwest.

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Builder Confidence Rises One Point in October, Remains at Summer Levels

Builder confidence in the market for newly-built single-family homes rose one point to 68 in October on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). Builder confidence levels have held in the high 60s since June.

“Builders are motivated by solid housing demand, fueled by a growing economy and a generational low for unemployment,” said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La. “Builders are also relieved that lumber prices have declined for three straight months from elevated levels earlier this summer, but they need to manage supply-side costs to keep home prices affordable.”

“Favorable economic conditions and demographic tailwinds should continue to support demand, but housing affordability has become a challenge due to ongoing price and interest rate increases,” said NAHB Chief Economist Robert Dietz. “Unless housing affordability stabilizes, the market risks losing additional momentum as we head into 2019.”

Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

The HMI index measuring current sales conditions rose one point to 74 and the component gauging expectations in the next six months increased a single point to 75. Meanwhile, the metric charting buyer traffic registered a four-point uptick to 53.

Looking at the three-month moving averages for regional HMI scores, the Northeast rose three points to 57 and the South edged up one point to 71. The West held steady at 74 and the Midwest fell two points to 57.

Editor’s Note: The NAHB/Wells Fargo Housing Market Index is strictly the product of NAHB Economics, and is not seen or influenced by any outside party prior to being released to the public. HMI tables can be found at nahb.org/hmi. More information on housing statistics is also available at housingeconomics.com.

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