New Housing Starts and Permits Fell in September as Activity Appears to Plateau
Housing construction activity fell in September as single-family and multifamily starts declined. Housing permits, an indicator of future activity, also fell in the latest month, pulled down by a plunge in multifamily permits. Overall, housing construction activity appears to be plateauing after rebounding from the housing boom-bust cycle in the early 2000s. The plateau is well below peak levels of activity achieved during previous economic expansions (see chart).
Total housing starts fell 4.7 percent in October to a 1.127 million annual rate. The dominant single-family segment, which accounts for about ¾ of new home construction, fell 4.6 percent for the month to a rate of 829,000 units. Starts of multifamily structures with 5 or more units fell 6.2 percent to 286,000. Among the four regions in the report, total starts fell in three regions, the northeast, midwest, and south but rose in the west. For the single-family segment, starts were up in three regions, the northeast, the midwest and the west but down sharply in the largest region, the south.
For housing permits, total permits fell 4.5 percent to 1.215 million from 1.272 million in September. Single-family permits rose 2.4 percent to 819,000 while permits for 2 to 4 family units were unchanged and permits for 5 or more units plunged 17.4 percent to 360,000. Among the major regions, total permits rose in two regions, the northeast and midwest but were down the south and the west. For the single-family segment, permits were up in three regions, the northeast, the midwest and the west but down slightly in the largest region, the south.
Housing permits is one of the AIER leading indicators. This indicator had posted a strong run of positive results as the housing market recovered from the Great Recession. However, it has registered neutral readings for five of the past six months. This suggests that housing is likely to be neither a strong contributor nor significant restraint on overall economic growth in the months ahead.
Robert Hughes
Robert Hughes joined AIER in 2013 following more than 25 years in economic and financial markets research on Wall Street. Bob was formerly the head of Global Equity Strategy for Brown Brothers Harriman, where he developed equity investment strategy combining top-down macro analysis with bottom-up fundamentals. Prior to BBH, Bob was a Senior Equity Strategist for State Street Global Markets, Senior Economic Strategist with Prudential Equity Group and Senior Economist and Financial Markets Analyst for Citicorp Investment Services. Bob has a MA in economics from Fordham University and a BS in business from Lehigh University.
