October 2015 Residential Permits, Starts and Completions

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Total housing starts retreated in October to a seasonally adjusted and annualized rate (SAAR) of 1.060 million units (1.162 million expected), 131,000 units below (-11.0% ±13.5%*) September’s 1.191 million units (revised from 1.206 million). The decrease in total starts was split as follows -- single-family: -18,000 units (-2.4% ±9.9%*); the notoriously volatile multi-family component: -113,000 units (-25.1%).

* 90% confidence interval (CI) is not statistically different from zero. The Census Bureau does not publish CIs for the entire multi-unit category. 

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Total starts were 2.0% below their not-seasonally adjusted year-earlier level (single-family: +2.9%; multi-family: -10.4%); the reported seasonally adjusted YoY change in total starts was -1.8% ±11.2%*). Year-to-date (YTD) comparisons to 2014 were all in the +10% range. Despite the drop in starts, October marks the fifth consecutive month in which there were more than 500,000 multi-family units under construction in structures with five or more units, the longest streak since the mid-1970s. 

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Completions fell by 62,000 units (-6.0% ±15.8%*) in October, to 965,000 units SAAR. The decrease was overwhelmingly skewed to the multi-family component (-59,000 units or 15.4%); single-family completions edged down 3,000 units (-0.5% ±13.3%*). YTD, multi-unit completions in particular were still running well ahead relative to 2014. 

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Total permits proved to be the silver lining in the October report, rising by 45,000 units (+4.1% ±1.5%) to 1.150 million SAAR. The multi-family component dominated the absolute increase: +28,000 units (+6.8%); single-family: +17,000 units (2.4% ±1.5%). YTD total permits were 9.8% above the same months in 2014, driven by the multi-family component (+15.3%).

The latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI) slipped 3 percentage points (to 62) in November. (An HMI value above 50 means more builders feel the market is good than feel it is poor.) “Even with this month’s drop, builder confidence has remained in the 60s for six straight months -- a sign that the single-family housing market is making long-term headway,” said NAHB Chairman Tom Woods. “However, our members continue to voice concerns about the availability of lots and labor.”

“The November report is pullback from an unusually high October, and is more in line with the consistent, modest growth that we have seen throughout the year,” said NAHB Chief Economist David Crowe. “A firming economy, continued job creation and affordable mortgage rates should keep housing on an upward trajectory as we approach 2016.” 

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The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.