Housing Starts in Strong Post-Storm Rebound

Housing starts jumped by nearly 14 percent in October, rebounding from a post-hurricane slump, HUD and the Census Bureau reported Friday.

The report said privately owned housing starts in October rose to 1.290 million, seasonally adjusted annual rate, 13.7 percent higher than September’s revised estimate (1.135 million) but 2.9 percent lower than a year ago (1.328 million). Single-family housing starts in October rose to 877,000; 5.3 percent higher than September’s revised 833,000. The October rate for units in buildings with five units or more rose to 393,000, up by more than 37 percent from October (286,000) but down by 12 percent from a year ago.

Regionally, housing starts improved everywhere except the West, where starts fell by 3.7 percent, seasonally adjusted, to 312,000 units in October from 324,000 in September and fell by 9.3 percent from a year ago.

In the South, starts rose by 17.2 percent to 621,000 units, seasonally adjusted, from 530,000 units in September but fell by 0.5 percent from a year ago. In the Northeast, starts rose by 42.2 percent to 145,000 units in October from 102,000 in September but fell by 10.5 percent from a year ago. In the Midwest, starts jumped by 18.4 percent to 212,000 units in October from 179,000 in September and improved by 7.1 percent from a year ago.

Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C., said the stronger recovery in housing starts bodes well for fourth quarter residential investment.

“The 13.7 percent increase in housing starts was much stronger than expected,” Vitner said. “Housing starts are now at a 1.29 million-unit pace, which is the strongest in a year. The increase was broad-based.”

Building permits also posted strong gains. Privately owned housing units authorized by building permits in October rose by nearly 6 percent to 1.297 million, seasonally adjusted, from September’s revised 1.225 million and improved by 0.9 percent from a year ago. Single-family authorizations rose by nearly 2 percent to 839,000 in October from September’s revised 832,000. Authorizations of units in buildings with five units or more rose by 13.4 percent to 416,000 in October from 367,000 in September..

“The Commerce Department said that areas in Texas and Florida impacted by Hurricane Harvey and Hurricane Irma accounted for about 13 percent of U.S. building permits in 2016–one explanation for the Southern region’s October drop, although the 3.0 percent monthly increase in permit issuance in the South indicates some rebound from the hurricanes’ impact,” said Mark Fleming, chief economist with First American Financial Corp., Santa Ana, Calif. “By the looks of this month’s numbers, the South, which accounts for almost half of the nation’s housing starts, could be seeing a rebound from effects of the hurricanes.”

Vitner agreed. “The pace of building came back stronger than before the storms hit, which suggests the increase from recovery may have already started in Q4,” he said. “The increase in permits issued also bodes well for residential investment in coming months.”

The report said privately owned housing completions in October rose by 12.6 percent to 1.232 million, seasonally adjusted, from September’s revised 1.094 million and improved by 15.5 percent from a year ago. Single-family housing completions in October rose by 2.6 percent to 793,000 from September’s revised 773,000; the October rate for units in buildings with five units or more rose to 433,000, up by nearly 38 percent from September (314,000) and up by 42 percent from a year ago.