Florence Put Damper on September Housing Starts
Hurricane Florence did more than cause $13 billion in damage across the South; it also knocked September housing starts for a loop.
HUD and the Census Bureau yesterday reported privately owned housing starts in September fell to a seasonally adjusted annual rate of 1.201 million, 5.3 percent below the revised August estimate of 1.268 million, but 3.7 percent higher from a year ago.
The report said single-family housing starts in September fell by 0.9 percent 871,000 from August’s revised 879,000. The September rate for units in buildings with five units or more fell to 324,000, down by nearly 13 percent from August (372,000) but up by 4.5 percent from a year ago.
Regionally, results were mixed, but declines in the Florence-hit South proved the difference. In the South, starts fell by nearly 14 percent to 567,000 units, seasonally adjusted, in September from 657,000 in August but improved by 4.4 percent from a year ago. In the West, starts rose by 6.6 percent to 354,000 units in September from 332,000 in August and improved by nearly 8 percent from a year ago. In the Midwest, starts fell by 14 percent to 160,000 units in September from 186,000 in August and fell by 14 percent from a year ago. In the Northeast, starts jumped by 29 percent to 120,000 units in September from 93,000 units in August and improved by nearly 19 percent from a year ago.
“Total housing starts came in slightly below expectations,” said Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C. “Some of the weakness may be owed to Hurricane Florence, which hit the Carolinas in mid-September.”
The report said privately owned housing units authorized by building permits in September fell to a seasonally adjusted annual rate of 1.241 million, 0.6 percent below the revised August rate of 1.249 million and 1.0 percent lower from a year ago. Single-family authorizations in September rose to 851,000, 2.9 percent higher than the revised August figure of 827,000. Authorizations of units in buildings five units or more fell to 351,000 in September, down by 9.3 percent from August (387,000) and down by 9.3 percent from a year ago.
Privately owned housing completions in September also fell, to a seasonally adjusted annual rate of 1.162 million, 4.1 percent below the revised August estimate of 1.212 million but 7.0 percent higher than a year ago. Single-family housing completions in September fell to 844,000, 8.7 percent below the revised August rate of 924,000. The September rate for units in buildings with five units or more rose to 312,000, up by 10.2 percent from August (283,000) and up by 3.3 percent from a year ago.
Vitner said several dynamics remain in play for housing starts. “Despite the lackluster string of recent data on new residential construction, starts continue to slowly trend higher and are now up 6.4 percent year-to-date,” he said. “[However], housing is unlikely to make a significant breakout to the upside at this point in the business cycle. Higher mortgage rates and steadily rising home prices have significantly reduced affordability. Rising costs have made it more difficult to build homes at lower price points where demand is strongest. Labor costs continue to rise amid a shortage of skilled construction workers, a trend that does not appear to be getting better.”
Despite those headwinds, Vitner noted builders continue to express a “great deal of optimism about current conditions. Builders may also be getting some relief from higher materials prices, as lumber prices have fallen from the highs hit earlier this summer. Given that demand also appears to be holding its own, we expect activity to gradually improve in coming months.”
