October Housing Starts Surge

October housing starts exceeded all expectations in October, jumping by 25.5 percent with strong performances across the board, HUD and the Census Bureau reported yesterday.

The report said privately owned housing starts in October surged to a seasonally adjusted annual rate of 1.323 million, up by 25.5 percent the revised September estimate of 1.054 million and 23.3 percent higher than a year ago (1.073 million).

Single-family housing starts in October rose to 869,000; 10.7 percent higher than September’s revised 785,000. For buildings with five units or more, starts jumped to 445,000, a 75 percent increase from September (255,000) and a 28 percent improvement from a year ago.

Regionally, all areas of the country saw strong performances. In the South, starts rose by nearly 18 percent to 620,000 in October, seasonally adjusted, from 526,000 in September and improved by more than 20 percent from a year ago. In the West, starts increased by 23.2 percent to 345,000 units from September (280,000) and improved by 40 percent from a year ago. In the Midwest, starts jumped by 44 percent to 219,000 units in October from 152,000 in September and improved by 24.4 percent from a year ago. In the Northeast, starts jumped by 45 percent to 139,000 units in October from 96,000 in September and improved by 2.2 percent from a year ago.

Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C., said apartments “snapped back” in October following a sluggish September, while milder and dryer fall weather allowed for construction to begin on more homes than usual.

“Some bounce-back in apartment building had been expected, but single-family construction also rose solidly,” Vitner said. “The strength in housing starts, particularly single-family, matches up well with what builders have been reporting.”

Vitner added while October’s “blowout” housing starts numbers appear to be genuine, “we suspect that building activity is getting the benefit of unseasonably mild weather, which continued in November.”

Ralph McLaughlin, chief economist with Trulia, San Francisco, said October housing starts, while “statistically significant,” still have a long way to go. “Controlling for the number of household in the U.S., housing starts are only about 66% of their 50-year average,” he said. “To put October’s numbers into context, housing starts per household are about where they were in March 1993.”

The report said privately owned housing units authorized by building permits in October rose by 0.3 percent to 1.229 million, seasonally adjusted, from September’s revised 1.225 million and improved by 4.6 percent from a year ago (1.775 million). Single-family authorizations in October totaled 762,000; 2.7 percent higher than September (742,000); authorizations of units in buildings with five units or more came in at 439,000 in October, down by 1.8 percent from September.

The report also said privately owned housing completions in October rose by 5.5 percent to 1.055 million from September’s revised 1.0 million and improved by 7.2 percent from a year ago (984,000). Single-family housing completions totaled 749,000, up by 3.9 percent from September; the October rate for units in buildings with five units or more was 300,000, up by nearly 13 percent from September (266,000).