U.S. housing starts fall in September, homebuilding likely to rise higher

Housing starts in the U.S. dropped in the month of September after rebounding strongly in the prior month. Housing starts dropped 5.3 percent to 1.20 million in the month. The headline print came in slightly below expectations. An upward revision to July and a downward revision to August subtracted a net 4k from activity.

The fall in September was driven by the volatile multi-family segment that dropped 15.2 percent to 330k units in the month after rising around 20 percent in August. Single-family starts dropped 0.9 percent to 871k, giving back around half of last month’s gain.

Building permits also dropped in September, declining 0.6 percent to 1.24 million. The multifamily segment was entirely responsible for the fall, as single-family permits rose by 24k. Starts were dragged down by 14 percent falls in the South and Midwest. Rises in the West and Northeast helped cushion the blow. Starts rose 6.6 percent in the West and recovered almost 30 percent in the Northeast after declining for three straight months.

Report released today features a steep fall in the South, implying that activity eased much as expected, noted TD Economics. Rebuilding attempts in the aftermath of the recent hurricanes should give a temporary boost to residential construction toward the end of the year.

“Further out, homebuilding should trek higher, in line with an economy that is operating near full employment and a shortage of homes on the market. However, headwinds to both demand (rising prices and higher interest rates) and supply (rising material costs and shortage of workers and buildable lots) will limit the upside, making for a mild upward trajectory in starts through 2020”, added TD Economics.

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