Housing Construction Tumbles in September

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • Home building activity, measured by housing permits and starts FELL SHARPLY in September as multi-family activity contracted;
  • Permits and starts data for August was revised upward, making the September downturn still steeper;
  • The seasonally adjusted annual rate of total permits FELL 2.7 percent or 38,000 to1.39 million;
  • Permits for new single-family homes, however, ROSE 0.8 percent or 7,000 to 882,000;
  • The SAAR of all housing starts FELL 9.4 percent or 130,000 to 1.26 million;
  • Single-family permits ROSE a scant 0.3 percent or 3,000 while multi-family starts DROPPED a staggering 28.2 percent or 133,000 to 327,000;
  • The rate of total housing completions DROPPED 123,000 or 9.7 percent in September;
  • The SAAR of single-family completions FELL 8.6 percent or 80,000.

Trends:

  • Permit activity for single-family homes rose to the highest level since February 2018;
  • The percentage decline in multi-family starts was the largest since November 2016;
  • Single-family housing starts rose for the fourth straight month for the first time since March-June 2012;
  • Despite the month-month decline, total housing starts were up year-year for the fourth straight month;
  • The decline in housing completions was the steepest since June 2014.

Data Source: Census Bureau and Department of Housing and Urban Development

Image result for home building

Single-family home building barely survived a sharp downturn of all housing construction in September which may turn out to be good news for builders and developers.

The minuscule increases in single-family home permits and starts along with the sharp drop in completions of single-family homes could help to reduce the inventory of unsold new homes leading to higher prices for finished product.

According to the most recent report from the Census Bureau – for August – the number of new homes for sale at the end of August fell to a seasonally adjusted annual rate of 326,000, the lowest since last October. The number of unsold new single-family homes has fallen for three months in a row. Data for September is scheduled to be released next Thursday.

The data on home building activity provides explanation and context for the increase in builder confidence reported earlier this week by the National Association of Home Builders. At the same time continued low mortgage rates provide would-be home buyers with an incentive.

The Census-HUD report also marked a shift back to single-family home building activity.

In August, permits for new single-family homes represented just 61.4 percent of all housing construction permits. In September that share rose to a more respectable 63.6 percent but still from the 2018 average of 64.6 percent.

Single-family starts jumped to 73.1 percent of all starts in September, up from 66.0 percent in August and from the 69.9 percent average for all of 2018.

Hear Mark Lieberman every Friday at 6:20 am on POTUS Morning Briefing, Sirius-XM 124. You can follow him on Twitter at @foxeconomics.

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