Interest Rate Roundup

Tuesday, October 19, 2010

Housing starts inch up, permits fall

The latest figures on home construction were just released. In September ...

* Housing starts rose 0.3% to a seasonally adjusted annual rate of 610,000 from 608,000 in August. That's the highest since April, and above forecasts for a reading of 580,000. On the other hand, building permits slumped 5.6% to 539,000 from 571,000 a month prior. That's the lowest level since April 2009 and well below the consensus forecast of 575,000.

* By property type, single family starts popped 4.4% while mutifamily starts dropped 9.7%. The permit data showed a similar split, with single-family permits inching up 0.5% (the first gain since March) and multifamily permits tanking 20.2%.

* Regionally, starts gained 2.9% in the Northeast and 4.8% in the South. They fell 3.6% in the West and 8.2% in the Midwest. Permits were weak across the board, falling 1.5% in the Northeast, 4.3% in the Midwest, 4.7% in the South and 10.6% in the West.

The construction industry perked up a bit in September. Overall starts hit a six-month high and the single-family market in particular showed relative strength. We also learned yesterday that home builders are slightly more optimistic about the future these days. That's a change of pace for the down-on-its-luck industry.

Still, there's no any evidence of a robust recovery here. Starts remain mired in a general range of 500,000 to 650,000 units -- a far cry from the 2-million-plus numbers we were putting on the board a few years ago. Why aren't builders doing more? Because we're only slowly but surely chiseling away at the mountain of distressed "used" homes on the market. Until that supply mountain shrinks, builders won't have any reason to ramp up production. I expect construction activity and construction hiring to remain muted for some time.


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