Housing starts dropped 9% in September to a seasonally adjusted annual rate of 1.047 million starts from August’s (slightly) upward-revised 1.150 million figure, the Commerce Department reported Wednesday. September’s housing starts trail the September 2015 figure by 11.9%.
However, building permit authorizations — a key indicator of future construction activity — came in at a seasonally adjusted annual rate of 1.225 million, up 6.3% from August and 8.5% from September 2015.
Multifamily buildings with five or more units pulled the overall housing starts figure down last month, plummeting 38.9% in September from August to an annualized rate of 250,000 starts, down 42.5% from a year ago. Meanwhile, single-family posted a rate of 783,000 starts, 8.1% higher than August and 5.4% ahead of the year-earlier period.
September's starts figure is the lowest since March 2015, missing analyst expectations of 1.18 million, according to economists polled by MarketWatch, as the housing market struggles to maintain consistent recovery. The uptick in building permits is hopeful, however, indicating that a boost in new construction activity may be ahead.
The considerable drop-off in multifamily's growth rate wasn't a shock for industry experts. While single-family was expected to post gains this year, multifamily is slowing down after having led the housing market's recovery from the recession, NAHB Chief Economist Robert Dietz said during a webinar earlier this year. Additionally, many younger would-be homeowners rented during the recession and are now considering purchasing a home of their own.
The news follows the release Monday of the National Association of Home Builders/Wells Fargo Housing Market Index, which recorded builder confidence in October at its second-highest level so far this year after an exceptionally strong September reading. The Index’s sales expectations figure rose one point in October to a mark of 72. NAHB Chairman Ed Brady called out a shortage of lots and labor as holdups to new construction, but high levels of pent-up demand have builders confident in future construction activity.
Overall, housing inventory was down 7% year over year in the third quarter, and the national homeownership rate is at its lowest level since 1965. With existing inventory especially tight, home prices rising and new construction hovering at an annual rate just above 1 million for most of the year, industry watchers question when and how builders will accommodate the incoming generation of millennial homebuyers.
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