The only important U.S. economic data released this morning was a report from the Census Bureau, which showed that privately-owned housing starts in September grew at a seasonally adjusted annual rate (SAAR) of 1.047 million units. That was a sharp 9.0 percent drop from August’s upward-revised print, the weakest reading since March 2015, and significantly worse than economists had expected. The decline in September was driven by a 38.9 percent plunge in multi-family units (rentals), while single-family housing starts lifted by a healthy 8.1 percent. Regionally, total housing starts were flat in the West last month but declined everywhere else, with the largest drop occurring in the Northeast (-36.0 percent). Total building permits, a popular gauge of future construction activity, rose in September (+6.3 percent to 1.225 million units) but the gain was driven mainly by rental properties. On a year-over-year basis, growth has been disappointing recently for both authorizations and starts due to a combination of land supply scarcity, still relatively tight credit standards, and local delays in getting building permits approved. However, continued strength in the labor market (wage growth), accelerating Millennial household formation, and a slow pace of interest rate normalization from the Federal Reserve should all remain supportive of U.S. home construction in the medium-term.
Sources: Econoday, Twitter, Bloomberg, ZH, U.S. Census Bureau, FRBSLPost author: Charles Couch