MF Starts Rise While Permits Fall

WASHINGTON, DC—Construction starts on multifamily units rose 18.3% in September from the previous month, and 28.6% year over year, fueling a 6.5% increase overall in residential starts to the second-highest monthly tally in eight years, the federal government said Tuesday. However, data from the Census Bureau and the Department of Housing and Urban Development also show that permits for new apartment units declined on both a monthly and annual basis, while permits overall were off 5% from the previous month although up 4.7% Y-O-Y.

Single-family starts ticked upward in September, rising by 0.3% to a seasonally adjusted annual rate of 740,000 units. “Despite the modest month-over-month differentials in single-family production, this sector has shown gradual improvement throughout 2015,” says David Crowe, chief economist for the National Association of Home Builders. “Since January, single-family starts are up 11% and we anticipate a similar pace for the rest of this year.”

The housing-starts data comes on the heels of NAHB announcing a three-point increase in builder confidence as measured by the NAHB/Wells Fargo Housing Market Index. This month's reading is a return to HMI levels last seen at the end of the housing boom in late 2005.

“With October's three-point uptick, builder confidence has been holding steady or increasing for five straight months,” Crowe says. “This upward momentum shows that our industry is strengthening at a gradual but consistent pace.”

Other economists say the federal data bear out Crowe's general assessment. “While the trajectory may not be a straight line, the housing market continues to improve at a measured pace,” says Kristin Reynolds, US economist at IHS Global Insight.

At ITG Investment Research, chief economist Steve Blitz says the housing starts data were in line with his projections for September. “Single-family starts rose to 740,000 units SAAR from 738,000 in August while multi-family jumped to 454,000 units SAAR from 388,000 in Aug and 382,000 in July after being at 510,000 in June,” he writes. “Given the penchant for multifamily builders to start in certain months more so than in others, three-month moving averages give a better sense of construction trends.”

Comparing the third quarter to the second, Blitz notes that housing starts are up 0.5% from the previous quarter, but single-family is down by 6.7% from Q2 while multifamily is up 5.6%. He sees as this as “yet one more reason to believe third-quarter GDP growth will only be around 1%.”