Housing Starts Impacted By Hurricanes

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Today’s Census report gives us another chapter in the same old story of slow and steady growth in housing starts .  The report shows that  there were 1,127,000  housing starts in September. This number is down from the previous revised print o f 1,183,000. However, we are still showing year over year growth in single family starts. We also can see the impact of the Hurricanes in this report, as single family starts post a 15% decline in the South.

From Census: 
https://www.census.gov/construction/nrc/pdf/newresconst.pdf

Housing Starts:
Privately-owned housing starts in September were at a seasonally adjusted annual rate of 1,127,000. This is
4.7 percent (±8.1 percent)* below the revised August estimate of 1,183,000, but is 6.1 percent (±8.8
percent)* above the September 2016 rate of 1,062,000. Single-family housing starts in September were at a
rate of 829,000; this is 4.6 percent (±8.5 percent)* below the revised August figure of 869,000. The
September rate for units in buildings with five units or more was 286,000

Building Permits:
Privately-owned housing units authorized by building permits in September were at a seasonally adjusted
annual rate of 1,215,000. This is 4.5 percent (±1.6 percent) below the revised August rate of 1,272,000 and
is 4.3 percent (±1.7 percent) below the September 2016 rate of 1,270,000. Single-family authorizations in
September were at a rate of 819,000; this is 2.4 percent (±1.7 percent) above the revised August figure of
800,000. Authorizations of units in buildings with five units or more were at a rate of 360,000 in
September

The chart below shows the deviation of single family starts from multifamily starts which began in earnest with the expiration of the 2015 multifamily tax credit. The rate of growth for rent inflation has peaked as supply has caught up with demand.

From Calculated Risk:
http://www.calculatedriskblog.com/2017/10/housing-starts-decreased-to-1127.html

StartsShortSept2017

From BLS:
https://www.bls.gov/charts/consumer-price-index/consumer-price-index-by-category.htm#

October rent inflaiton

Growth in starts of single family homes was 5.9% year over year, lower than anticipated due to the Hurricanes.

We simply don’t warrant more housing starts with this low demand. New home sales haven’t even been able to crack over the 600,000 sales mark for the year.  With or without the hurricanes the housing market story in this cycle has been for only slow and steady growth for housing starts and new home sales.  The key always is single family starts and even thought total starts are up only 3.1% year to date, single family starts are up 9.1% year to date. As long as we keep growing single family starts, this cycle has legs. Also, we can clearly see we don’t have an over investment thesis in housing in this cycle.

From Doug Short:
https://www.advisorperspectives.com/dshort/updates/2017/10/18/new-residential-housing-starts-down-in-again-in-september

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Logan Mohtashami is a financial writer and blogger covering the U.S. economy with a specialization in the housing marketLogan Mohtashami is a senior loan officer at AMC Lending Group,  which has been providing mortgage services for California residents since 1987. Logan also tracks all economic data  daily on his own facebook page https://www.facebook.com/Logan.Mohtashami