Housing starts in the United States fell 1.6% to 1.56 million units (annualized) in September, below market expectations for a stable impression near the 1.6 million mark. Housing starts were revised up 7k in July and down 35k in August to 1.58 million.

The decline was a multi-family story, with the latter falling 5.0% (or 25k), repeating half of the previous month’s gain. Starts in the single-family home segment remained unchanged at 1.08 million.

Licensing activity fell 7.7% (or 132k) to 1.59 million, wiping out gains made in the previous two months. The decline was concentrated in the multi-family market, where permits fell 18.3% (or 123,000). The single-family home market fared better, with permits falling only 0.9% (or 9k) over the month.

Residential construction activity has been mixed from region to region. Housing starts fell 27.3% in the Northeast and 6.3% in the South, but rose 6.9% in the Midwest and 19.3% in the West.

Key implications

The decline in housing starts and the downward revision from the previous month are disappointing, but the underlying picture for residential construction is better than it looks. Given the volatile nature of the series, it’s worth stepping back the lens and watching the trend. Housing starts have moved closer to the 1.6 million mark (annualized) since December 2020, this level of activity marking the best 10-month streak since 2006.

Under the relatively stable trend in housing construction, single-detached housing starts generally declined, while multi-family housing starts increased thanks to improved public health conditions and better prospects for urban living. . An improvement in sentiment among single-family home builders in recent months suggests that this larger segment may soon shift to a more positive trend.

Homebuilding fundamentals remain strong, thanks to exceptionally low inventory levels and expectations of continued labor market healing as the pandemic spreads further in the rearview mirror. Nonetheless, persistent challenges related to supply chains and the search for labor on the production side, as well as affordability issues on the demand side, are likely to maintain an ever-present level of activity. healthy.

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