Housing starts decline, but builders say they're okay with it

Housing starts fell by a fairly alarming 9.4% in September to a seasonally adjusted rate of 1.26 million units, according to new data from the Commerce Department. The multifamily sector, which includes apartments and condos, saw new starts fall by 28.2% to just 338,000. Single-family home starts were up 0.3% to 918,000 units.

The decline in new home starts comes at the worst possible time for the housing industry as it struggles with ever-shrinking inventory problems, but builders themselves said they were happy with the numbers.

“Multifamily starts fell from an unsustainably high level in August and are running at a solid pace despite the sharp monthly decline,” said the National Association of Home Builders’ chief economist Robert Dietz. “Meanwhile, the rebound for single-family construction continues. Single-family permits have increased since April, and single-family starts have posted gains since May. In another positive development, September marked the first monthly increase for the number of single-family homes currently under construction since January.”

On a regional basis, home starts rose by 6% in the South, but fell 12.2% in the West, 6.2% in the Midwest and 0.6% in the Northeast.

The Commerce Department’s data also included some numbers on housing permits, which are typically used as a gauge of future construction. But the number of new permits granted in September fell by 2.7% overall to just 1.39 million. Single-family home permits rose 0.8%, but it was multifamily than again let the side down, with new permits there falling by 8.2%.

“Single-family builders continue to see positive conditions for housing and this is reflected in the NAHB’s Housing Market Index, which measures builder sentiment,” said NAHB Chairman Greg Ugalde. “However, builders are still being somewhat cautious as they continue to deal with supply-side challenges that impact housing affordability.”

Lawrence Yun, chief economist of the National Association of Realtors, also weighed in on the debate, saying the current housing shortages are a big problem for real estate markets.

“Apartment vacancies are low and the number of homes listed for sale are just not enough,” Yun said. “Naturally, developers should be boosting home construction to relieve the tight supply. To a degree it is moving in the right direction – single-family housing starts rose a notch in September and are higher by 4% from a year ago, but multifamily starts, which have been predominantly apartments and not condominiums, sharply declined.”