September Residential Construction

Starts Stop, Permits Perk Up

  • September Housing Starts unexpectedly fell by 9.0 percent to a 1,047,000 unit annual rate.
  • Permits for new residential construction gained 6.3 percent to a 1,225,000 unit pace in September.

Housing starts unexpectedly fell by 9.0 percent in September, to a 1,047,000 unit annual rate due to a sharp contraction in multifamily projects. Housing starts for structures with five or more units fell by 38.9 percent in September. The biggest part of that drop was concentrated in the Northeast, where total housing starts fell by 36.0 percent in September. The Midwest saw a decline of 14.1 percent. The South lost 5.3 percent and the West was unchanged for the month. The large drop in multifamily construction in September is a statistical outlier, but it is not unprecedented. It is the most dramatic monthly decline (on a percent change basis) in multifamily starts since February 2011. Also, it is worth noting that the 90 percent confidence interval around the 9.0 percent September dip in housing starts is plus or minus 9.2 percent. This could be the one time out of 10 that reported numbers do not reflect the overall population of housing starts. Other parts of today’s residential construction report are pointing north while multifamily starts point south. Nationwide, single-family housing starts in September increased by 8.1 percent to a 783,000 unit annual rate. Permits for new residential construction also tell a different story than the multifamily starts numbers. Overall, permits increased by a strong 6.3 percent in September to a 1,225,000 unit rate as multifamily permits surged. So we will view the September housing starts data with healthy skepticism. Most of today’s residential construction report was positive.

Mortgage applications for the week ending October 14 increased, as the Mortgage Bankers Association’s purchase index gained 3.0 percent for the week. The refi index dropped by 0.8 percent after a hefty 8.0 percent decline the week before. The composite rate for a 30-year fixed rate mortgage ticked up 5 basis points to 3.73 percent, the highest it has been since the end of June.

Market Reaction: Stocks opened with losses but have reversed. The yield on 10-Year Treasury bonds is up to 1.75 percent. NYMEX crude oil is up to $51.84/barrel. Natural gas futures are up to $3.58/mmbtu.

HousingStarts.10.19.16

For a PDF version of this Comerica Economic Alert click here: Housing Starts 101916.

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