WorldWideMarkets Community

Forex Trading, Market News & Technical Analysis

US Housing Starts Plunge as Apartment Construction Collapses

Posted by Joseph Trevisani on Oct 19, 2016 1:13:58 PM

Housing starts fell in September, dragged down by a sharp drop in apartment house construction even as groundbreakings for single-family homes reached their best level since February.

Work began on 1.047 million total units, down 9 percent from 1.150 million in August and the weakest since March, Commerce Department information showed on Wednesday.  Economists in the Bloomberg survey had forecast a rise to 1.175 million units.  On the year housing starts are down 11.9 percent, the worst annual decline since April 2011. 

Building permits, a gauge of future construction, rose 6.3 percent in September to 1.225 million, the best pace since November’s 1.165 million. A gain of 1.1 percent had been predicted. The August total was revised up to 1.152 million from 1.139 million. 

Single-family starts jumped 8.1 percent to a 783,000 annual rate last month. It was the highest pace since February. Starts are 5.4 percent higher on the year. Single family permits rose just 3,000, 0.4 percent, to 739,000 in September from 736,000 indicating tere is no imminent surge in single unit construction.

Over the last 30 years single family homes have averaged of 77 percent of overall new construction. Over last five years however that average has fallen to 67 percent as rentals have taken up an increasing share of the shelter market and construction. In August the percentage of single family starts had fallen to 63 percent, the jump to 75 percent in September is a return to historical norms.

Construction of multifamily housing, structures from two units to large apartment buildings, fell by 38 percent on the month, from 426,000 in August to 264,000 in September and is 40.8 percent lower on the year.  Permits for multi family dwelling rose 16.8 percent in September to a 486,000 annual pace.  

Despite the moderately strong labor market in recent years and historically low mortgage rates, the demand for single family homes has mostly resulted in higher prices for existing homes rather than additional construction.

One large problem for potential home owners has been the scarcity of wage increases since the recession another has been that the mix of new employment has been weighted with part-time and low wage jobs at much higher than historical averages. 

Over the past 30 years the construction of new single family homes has averaged 1.028 million units a year, for a population that that grown 35 percent from 1986 to this year. The 736,000 monthly average this year of single family units is just 72 percent of that historical average and half of what it would be if corrected for the increase in population.  

The 9.0 decline in housing starts in September coupled with the 5.6 percent fall in August, outstripping the 1.9 percent rise in July, suggests that home construction, which accounts for about 3 percent of U.S. economic activity, will remain a drag on gross national production in the third quarter as it was in the second.

Last month construction on single-family homes in the Northeast, the smallest market, climbed 20 percent.  Starts in the South, where the majority of new building occurs, surged 12.1 percent. Groundbreaking on single-family dwelling rose 6.3 percent in the Midwest, but fell 2.2 percent in the West.

Joseph Trevisani

Chief Market Strategist

WorldWideMarkets Online Trading

Charts: Bloomberg

ho0using_starts..all_oct_19.png

housign_starts_yoy_oct_19-1.png

 

 

 

 

Tools & Educational Resources

Forex 101LEARN MORE >>
Learn the basics of Forex and how to practice trading the markets.

GlossaryLEARN MORE >>
Confused by the language? Click here and search for key trading terms.

FAQ CenterLEARN MORE >>
Browse our frequently asked questions and find your answers right away.

VideosLEARN MORE >>
Access to the educational lessons, webinars and platform walkthroughs.

READY TO TRY THE MARKETS?

Get started with a FREE $10,000 Demo Account and experience the Forex Market RISK FREE!