Coverage: Home construction rises 1.5 percent in October

U.S. home construction improved a slight 1.5 percent in October, but in a troubling sign, ground breakings for single-family houses fell.

Josh Boak of the Associated Press had the news:

The Commerce Department said Tuesday housing starts rose to a seasonally adjusted annual rate of 1.23 million, up from 1.21 million in September. The gains came entirely from apartments. Starts for single-family houses slipped 1.8 percent last month.

Housing has stumbled in recent months as mortgage rates have climbed, putting the ability to buy a home or move up to a nicer property out of reach for more Americans. A sharp increase in mortgage rates has led to a marked decline in home construction since May, such that ground breakings have fallen 2.6 percent over the past 12 months.

“The housing construction cycle has peaked, but we’re not expecting a meltdown,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

Some construction in the South might have been disrupted by Hurricane Florence striking the Carolinas in September and Hurricane Michael then hitting Florida and Georgia in October. But ground breakings recovered somewhat in the South last month, increasing 4.7 percent.

Katia Dmitrieva of Bloomberg News reported that single-family home starts fell for the second month:

Residential starts increased 1.5 percent to an annualized rate of 1.23 million from the prior month’s upwardly revised 1.21 million, government figures showed Tuesday. While that matched the median estimate of economists, single-family home starts fell for a second month. Permits, an indication of future construction, fell 0.6 percent to a 1.26 million rate, also in line with projections.

The data suggest that builders are seeing steady demand from buyers amid a solid labor market and tax cuts that have boosted take-home pay. Those are cushioning the impact of mortgage rates at an eight-year high and home prices still outpacing wage gains. An easing in lumber prices from a record earlier this year may also be providing some relief to developers. At the same time, the figures followed a report Monday showing the biggest drop in homebuilder sentiment since 2014, indicating developers are becoming less optimistic that future demand will withstand headwinds. The increase in starts was concentrated in the more-volatile multifamily category, such as apartment buildings and condominiums, which rose 10.3 percent to an annual rate of 363,000.

Jann Swanson of Mortgage News Daily reported that the results were lackluster:

Construction was started on 1,228,000 units of housing in October, a 1.5 percent improvement over September’s seasonally adjusted annual rate of 1,210,000.   The latter is a revision from the 1,201,000 units originally reported.  Despite the improvement, starts are still down 2.9 percent from October 2017.

Results were in the mid-range of analysts’ expectation which ran from 1,180,000 to 1,269,000.  The consensus was 1,260,000 construction starts.

Single family houses were started at a seasonally adjusted annual rate of 865,000 units, down 1.8 percent from the October 2017 estimate of 881,000 units.  September starts were originally estimated at 871,000 units.  The seasonally adjusted rate for multifamily starts roses by 20,000 units month-over-month to 343,000, an increase of 6.2 percent.  Multi-family starts are lagging those in October 2017 by 4.5 percent.

On a non-adjusted basis there were 107,300 units started in October compared to 106,900 in September.  The respective numbers for single family starts were 74,600 and 75,300.  For the YTD there have been 1,081,500 compared to 1,023,700 for the first 10 months of 2017 Single family starts YTD in 2018 are 764,600 up from 724,700 last year.