Interest Rate Roundup

Tuesday, October 20, 2009

September housing starts, permits stable

We just got the latest data on housing starts and permits. Here's what the numbers showed:

* September housing starts inched up by 0.5% to a seasonally adjusted annual rate of 590,000 from a downwardly revised 587,000 in August. Single family starts rose 3.9%, while multifamily starts dropped 15.2%. Starts are still down 28.2% from year-earlier levels, but that's a smaller decline than the 40%+ YOY drops we were seeing in the spring.

* Building permits dipped 1.2% to 573,000 from 580,000 a month earlier. Single family permits dropped 3% ... the first decline since March ... while multifamily permits gained 6%.

* On a regional basis, starts dropped in 3 out of 4 regions, with the West down 8.8%, the Northeast off 5.5% and the Midwest down 1.8%. Starts rose 7.1% in the South. Permitting activity fell in 2 out of four regions (-1.7% in the South and West), while holding stable in the Northeast and Midwest.

After a steady upward march, the housing market appears to be stopping to catch its breath. Housing starts have leveled off, while single family permits showed their first dip in six months. Builders are growing more hesitant for a few reasons: The "Cash for Cottages" tax credit is about to expire ... job growth is MIA ... and consumer confidence is cooling a bit.

This doesn't mean the recovery is over. The sum total of the indicators I follow still suggest the worst of the downturn is behind us (with the exception of home prices -- those will likely continue to fall over the next year, albeit at a more gradual pace). But the recovery will be far from vigorous. Rather, it will be a gentle, halting, drawn out affair. Think three steps forward, two steps back here.


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