Drop in September U.S. Home Starts Reflects Slump in South

A larger-than-forecast decline in U.S. new- home construction reflected the weakest pace of building in the South since October 2015, showing the fallout from hurricanes Harvey and Irma, according to government figures Wednesday.

HIGHLIGHTS OF HOUSING STARTS (SEPTEMBER)

  • Residential starts dropped 4.7% m/m (est. -0.4%) to a 1.13m annualized rate (est. 1.18m), the slowest in a year
  • Starts in U.S. South slumped 9.3% to 527k; also fell in Midwest and Northeast
  • Single-family starts declined 4.6%, multifamily construction down 5.1%
  • Permits, a proxy for future construction, decreased 4.5% to 1.22m rate (est. 1.25m)
  • Key Takeaways

    Similar to other recent economic data, figures on housing starts have the potential to remain volatile for several months. The widespread damage from the hurricanes also may cause a further shortage of workers and ready-to-build lots, along with lingering supply-chain delays and higher prices for raw materials.

    Only homes that have to be completely rebuilt, for which a permit is issued as new construction, are counted as a start, while partially damaged dwellings are considered repairs.

    At the same time, history shows activity typically rebounds in later months as rebuilding efforts begin in areas affected by major storms. In a hopeful sign that concern over fallout from the hurricanes has been alleviated, a gauge of homebuilders’ confidence rebounded to a five-month high in October.

    Prior to the weather-related distortions, the steady job market and still-low mortgage costs were sustaining demand for housing. Economists expect residential construction will keep expanding, albeit gradually.

    Other Details

  • Single-family home starts fell to a 829,000 rate in September, the slowest since May, from 869,000 the prior month
  • Groundbreaking on multifamily homes, such as apartment buildings and condominiums, decreased to an annual rate of 298,000, the weakest in a year; data on these projects can be volatile
  • Report shows wide margin of error, with a 90 percent chance that the September figure was between a 12.8 percent drop and 3.4 percent gain
  • Report released jointly by the Census Bureau and Department of Housing and Urban Development in Washington
  • Bloomberg

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    Dean Popplewell

    Dean Popplewell

    Vice-President of Market Analysis at MarketPulse
    Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
    Dean Popplewell