Tumbling multi-family starts hammer housing starts

A 47.5% drop in multi-family starts last month was responsible for a much larger-than-expected 11.7% decline in housing starts to a seasonally adjusted annual rate of 519,000.  Pull out the volatile multi-family category and housing starts were down 1.1% to 436,000 in October.

Building permits didn’t fare much better, rising 0.5% to an annual rate of 550,000, while single-family permits inched up 1% to 406,000.



Home builder confidence has been edging higher, but as the chart above reveals, single-family permits for new homes, which is a good forward-looking indicator of the industry, has been dragging along the bottom for several months.

New home sales make up less than 10% of the overall market, but residential construction feeds directly into GDP, while increased employment and the ripple effect throughout the construction industry would have a more indirect impact on GDP.

Builders must still contend with the heavy backlog of foreclosures of later model homes, and still high unemployment and depressed consumer sentiment continue to hamper the industry.