U.S. housing starts rose 1.5% to 1.23 million (annualized) in October from a upwardly revised 1.21 million in September. The gain was concentrated in the volatile multi-family segment, which rose 10.3% to 363k units. Single-family starts declined 1.8% to 865k units. The market expected a 1.8% increase in starts.
Building permits, on the contrary, edged lower by 0.6% in October to 1.26 million (from 1.27 million in September). Both single and multi-family permits fell in the month.
Regionally, starts were up almost 33% in the Midwest and 4.7% in the South (the largest region), but were down 34.1% in the Northeast and 4.6% in the West.
Key Implications
The contribution of the housing industry to overall economic output has been relatively muted in the past few quarters. Rebuilding activity following the destruction of homes by Hurricanes Florence and Michael, however, are expected to buoy starts in the near-term, particularly those in the single family segment.
Despite the near term fillip, homebuilding activity faces significant headwinds. These include heightened affordability concerns as both interest rates and home prices have risen in recent months. These, in addition to already present supply constraints (labor and lot shortages), are likely to limit the upside potential for sustained increases in starts. Nevertheless, we do expect starts to eke out modest gains for the remainder of the year on the back of rising wages and steady demand.
