Builder Confidence Grows as Single-Family Construction Gains
- September Housing Starts increased by 6.5 percent to a 1,206,000 unit annual rate.
- Permits for new residential construction dropped in September by 5.0 percent to a 1,103,000 unit pace.
- The National Association of Home Builders’ Builder Confidence Index increased by 3 points in October.
Residential construction activity increased in September as total housing starts gained 6.5 percent. Single-family starts edged up by 0.3 percent to a 740,000 unit annual rate. Multifamily starts were up by 17.0 percent to a 454,000 unit rate. Gains were concentrated in the Northeast and the West. Residential construction permits eased in September, dropping 5.0 percent to a 1,103,000 unit rate. Single-family permits eased slightly, but multifamily permits dropped by 14.6 percent, showing typical volatility. We expect to see gradual improvement in the rate of construction into next year, supported by increasing new home sales and strong demand for new multifamily units. Solid job growth, improving consumer confidence and still-low home mortgage rates are all tailwinds for the housing market. Likewise, we expect construction employment to continue to grow, contributing to tightening labor market conditions in most major metropolitan areas. Exceptions to that rule may be found in oil producing areas where weak pricing is resulting in significant cutbacks in oil field activity. Solid residential investment will help fourth quarter GDP growth normalize after a weaker third quarter. We will get the Q3 GDP numbers on October 29 and we expect them to be significantly weaker than the 3.9 percent real growth rate recorded for Q2.
The National Association of Homebuilders’ builder confidence index increased by three points in October, to hit 64. According to the NAHB, the October increase represents a return to the builder confidence level of late 2005. The NAHB index is focused on the single-family market and showed gains in all four Census regions.
Market Reaction: After a weak open, stocks are up. The yield on 10-Year Treasury bonds is up to 2.07 percent. NYMEX crude oil is up to $46.28/barrel. Natural gas futures are up to $2.68/mmbtu.
For a PDF version of this Comerica Economic Alert click here: Housing Starts 102015.