Housing Starts in U.S. Dive 9 Percent Annually in September
Declining Multifamily Starts Drag Down New Construction Data
According to a new report from the U.S. Housing and Urban Development and Commerce Department, due to a decline in multifamily housing starts, total housing starts fell 9.4 percent in September to a seasonally adjusted annual rate of 1.26 million units.
The September reading of 1.26 million starts is the number of housing units builders would begin if they kept this pace for the next 12 months. Within this overall number, single-family starts increased 0.3 percent to 918,000 units. The multifamily sector, which includes apartment buildings and condos, fell 28.2 percent to a 338,000 pace.
"Single-family builders continue to see positive conditions for housing, and this is reflected in NAHB's Housing Market Index, which measures builder sentiment," said Greg Ugalde, chairman of the National Association of Home Builders (NAHB). "However, builders are still being somewhat cautious as they continue to deal with supply-side challenges which impact housing affordability."
"Multifamily housing starts fell from an unsustainably high level in August and are running at a solid pace despite the sharp monthly decline," said NAHB Chief Economist Robert Dietz. "Meanwhile, the rebound for single-family construction continues. Single-family permits have increased since April, and single-family starts have posted gains since May. In another positive development, September marked the first monthly increase for the number of single-family homes currently under construction since January."
On a regional and year-to-date basis, combined single-family and multifamily starts in September rose 6.0 percent in the South. Starts declined 0.6 percent in the Northeast, 6.2 percent in the Midwest and 12.2 percent in the West.
Overall permits, which are a harbinger of future housing production, fell 2.7 percent to a 1.39 million unit annualized rate in September. Single-family permits increased 0.8 percent to an 882,000 rate while multifamily permits declined 8.2 percent to a 505,000 pace.
Looking at regional permit data on a year-to-date basis, permits rose 8.1 percent in the Northeast and 3.4 percent in the South. Permits fell 4.9 percent in the Midwest and 3.5 percent in the South.
The National Association of Realtors Chief Economist Lawrence Yun commented, "The housing industry is plagued by a shortage of inventory. Apartment vacancy rates are low and the number of homes listed for sale are just not enough. Naturally, developers should be boosting home construction to relieve the tight supply. To a degree, it is moving in the right direction: single-family housing starts rose a notch in September and are higher by 4% from a year ago. But multifamily housing starts, which have been predominately apartments and not condominiums, sharply declined by 28% in September and are down 6% from a year ago. With new condo-rules on FHA mortgages, developers should anticipate rising demand for multifamily units."
Yun continues, "Building more homes is needed to help address housing affordability for both renters and home buyers. Increased supply will manage rent affordability, rather than the terrible policy of rent control. Furthermore, more home building will help boost economic growth. It is very likely that the GDP growth rate in the second half of this year will be light at under 2%. To get it moving higher, housing starts need to significantly ramp up."