Coverage: Hurricane Florence, higher mortgage rates hurt homebuilding

U.S. homebuilding dropped more than expected in September as construction activity in the South fell by the most in nearly three years, likely held down by Hurricane Florence.

Lucia Mutikani of Reuters had the news:

Other details of the report published by the Commerce Department on Wednesday were also soft. Building permits declined to their lowest level in almost 1-1/2 years and homebuilding completions were the fewest since November 2017.

The housing market, which has been a weak spot in a robust economy, has been hobbled by an acute shortage of properties for sale, higher home prices and rising mortgage rates. Residential investment contracted in the first half of the year and the latest data supports economists’ expectations that housing remained a drag on economic growth in the third quarter.

“The housing market continues to sputter,” said Robert Frick, corporate economist at Navy Federal Credit Union in Vienna, Virginia. “The question is if the low level of starts, permits and completions we’ve seen the last four months is a lull or a slide that won’t be corrected until the next recession.”

Housing starts fell 5.3 percent to a seasonally adjusted annual rate of 1.201 million units last month. Data for August was revised down to show starts rising to a rate of 1.268 million units instead of the previously reported pace of 1.282 million units.

Andrea Riquier of MarketWatch.com reported that there’s a broader concern about the economy as a result:

While the government’s new-home data is notoriously choppy and prone to sizable revisions, most of the details of this month’s report on starts show signs of waning momentum. Starts are 6.4% higher for the year to date than in the same period in 2017, but some of the details of the report are worrying.

Analysts watch the pace of single-family starts closely, because nearly all single-family houses are built for purchase, rather than rent. If builders are breaking ground on more houses, it’s a vote of confidence in the economy and buyers’ ability to finance their purchases. In September, those starts were 0.9% lower than in August, though nearly 5% higher than a year ago.

Builder sentiment, a measure analysts use to gauge likely activity levels, has made little headway this year. While the industry group that releases that index, the National Association of Home Builders, said that surging input prices had moderated since the summer, another group on Tuesday released a report saying construction materials prices were up 7.4% on the year in September.

Alcynna Lloyd of Housing Wire reported that multifamily construction starts were volatile:

Privately owned housing starts decreased in September to a seasonally adjusted annual rate of 1.201 million down 5.3% from August’s 1.268 million, but is still 3.7% up from the annual rate of 1.158 million in September 2017.

Single-family housing starts stood at a rate of 871,000, up nearly 5% from last year.

However, the volatility in multifamily is a monthly issue, the starts are still up 4.5% compared to last year. Nonetheless, multifamily starts were at 324,000, compared to last month’s 372,000 (revised down from 392,000), so that’s a 12.9% dip.

PriceWaterhouseCoopers Principal Scott Volling said regional results indicate that weather may have had an impact on housing starts.