Housing Starts and Permits Dive Again, Mainstream Media Blames Hurricanes: What's the Real Story?

Housing starts and permits disappoint again. Both sets of numbers were well under the consensus estimates. Mainstream media was quick to blame the hurricanes, but starts were also down in the Midwest and Notheast. Let's take a look at the numbers and the real story.

The Econoday consensus estimate for September housing starts was 1.170 million at a seasonally-adjusted annualized rate (SAAR). The Census Bureau reported 1.127 million starts SAAR, a decline of 4.7%.

Similarly, the consensus estimate was 1.238 million new housing permits but the Census Bureau reported 1.215 million, a decline of 4.5%.

Mainstream Media Blames Hurricanes

Permits, down 4.5%, are definitely not on the mend although single-family permits rose 2.4%.

The Wall Street Journal reports Hurricanes Weighed on Housing Starts in September but the subtitle hints at the real story: "Housing starts decreased in five of the last six months."

Barron's has an accurate headline Housing Starts: Now That’s a Slip! but the story itself reeks of overoptimism.

The hurricanes that walloped Houston, Florida and Puerto Rico haven’t led to a burst of rebuilding — just yet, as government data released this morning shows. Yet there are underlying bright spots for the future within the data and from other corners of the housing market.

Consider mortgage applications to buy a new home, which rose 4% this week, boosting the year-on-year rate by two percentage points to 9%. Builders are also more confident that the market is improving.

Jefferies highlighted this upbeat comment from NAHB chief economist Robert Dietz: “With a tight inventory of existing homes and promising growth in household formation, we can expect the new home market continue to strengthen at a modest rate in the months ahead.”

Housing Starts

Housing Starts Detail

Housing Starts Percent Change From Year Ago

Census Bureau Data

Analysis

The total number of starts declined by 56,000 but starts in the South declined by 54,000. If one attributes 100% of the decline in the South to hurricanes, then starts still would have suffered a small loss.

However, it's unlikely hurricanes are responsible for the entire South decline. As the lead chart shows, housing is in a topping pattern.

That pattern might be broken, but builder optimism, especially in light of falling customer traffic appears unwarranted.

If housing and autos both have peaked, and I believe they have, there is little if anything left of this historically weak recovery.

Mike "Mish" Shedlock

ok, housing is in a topping pattern. i am located in south florida and it appears we have a shortage of housing, this just based on the ridiculous rents that people are paying.

@Ivran: There will always be shortages of anything people are barred from freely producing more of.

i agree, but mish scenario combined with a shortage can only mean higher prices and he seems to be implying lower prices. i am not sure what to say.

Pressure on rents may mount - Multi-family starts falling faster than single-family. But what happens if people cannot at all afford single-family?

The Fed's war against savings has produced the clear and obvious effect of destroying ALL savings (including housing stock) -- not just savings accounts. More evidence that Bernanke and Yellen are stupid

From my Central Ohio perspective, where new builds are still strong, builders do not have the right mix of building stock. After the housing bust the only folks who could afford new homes were upper-middle class or wealthier folks with access to credit. Everyone else was shut out, thus the huge growth of multi-family rentals. Anyone who could afford and have access to credit for a new build have now built. Builders have been slow to re-enter the first-time home market for a multitude of reasons. It will be interesting to see how builders react to the slowing demand for high-end houses. For the first time in almost 10 years, Central Ohio now has more rental stock than demand. Rents should start to level or even go down over the next few years. That will keep first time buyers in rentals. I’m not sure what builders will do.

{{{ok, housing is in a topping pattern. i am located in south florida and it appears we have a shortage of housing, this just based on the ridiculous rents that people are paying.}}}} Check out rents anywhere in the NYC Tri State metropolitan area or any town in Eastern Massachusetts (now from Worcester toward Boston) and you will see what "ridiculous". The NYC suburbs (long Island & Westchester in particular as well where $2,000 a month may get you a basement apartment in Yonkers,.. In Eastern MA, I haven't seen anything at all for less than $1800 a month and public transport to Boston is nearly non existent

Pressure on rents may mount - Multi-family starts falling faster than single-family. But what happens if people cannot at all afford single-family? -- then why hasn't it in NYC? rents have barely 'slipped' but have by no means fallen despite the fact that permits & new construction is at levels not seen since the 1960s. Huge high rises are going up in Long Island City for example, the rents start at a wallet busting $3200 a month on average... In Manhattan & many parts of Brooklyn the price of 'admission' starts at over $4,000 a month

Also the economy in NYC is booming and has seen the strongest economic boom & high paying job growth (over $150,000 a year) in history for the past 6 or 7 years way stronger than any year in the 1980s

After the housing bust the only folks who could afford new homes were upper-middle class or wealthier folks with access to credit. }}} uh aren't these the types of people that SHOULD be considering buying a home and the others should stick to renting until they have that 20% down payment and can actually qualify based on the 28% front end / 34% back end ratios?? you know the ratio of TOTAL mortgage payment to monthly income & PITI + ALL OUTSTANDING debt to monthly income?? I think most people are too in love with having the latest Iphone and spending $200 for cable are more important

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