September Housing Starts Well Below Expectations

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The U.S. Census Bureau and the Department of Housing and Urban Development reported Wednesday morning that new housing starts in September fell to a seasonally adjusted annual rate of 1.201 million, a drop of 5.3% from the downwardly revised August rate of 1.268 million but an increase of 3.7% compared with the September 2017 rate of 1.158 million.

The revision to the August rate dropped 14,000 new housing starts from the previously reported total. The consensus estimate from a survey of economists expected a September rate of around 1.216 million.

Housing starts in September came in sharply lower than expected considering the downward revision of the August tally. Residential investment appears to be a weak spot in an otherwise strong U.S. economy.

For the first eight months of the year, total starts are up 6.4% on a non-seasonally adjusted basis, and single-family starts are up 6.0%. Construction of buildings with five or more units is up 7.3% over the same period.

Single-family housing starts slipped month over month by 8,000 in September to 871,000. The decrease primarily reflects a month-over-month decline of 32,000 in the South.

The seasonally adjusted rate of new building permits slipped to 1.241 million, down 0.6% from the revised August rate of 1.249 million and 1% lower than the September 2017 rate.

Permits for new single-family homes rose month over month in September from a revised annual rate of 827,000 in August to a seasonally adjusted annual rate of 851,000. The rate increased by 2.4% year over year.

Multifamily starts for buildings with five or more units increased by 4.5% year over year in September and fell by 12.9% compared with August. This number is more volatile than the single-family number and has been moving mostly sideways since 2013.

In 2017, 1.202 million housing units were started, up 2.4% compared with 2016, and a 10-year high. An estimated 1.263 million permits were issued in 2017, up 4.7% year over year.

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