U.S. home-building rebounded in September, driven by a boost in multifamily construction.
Housing starts rose 6.5% from a month earlier to a seasonally adjusted annual rate of 1.21 million in September, the Commerce Department said Tuesday. The increase was due to an 18.3% surge in multifamily units, which include apartments and condominiums. Starts of single-family homes, which make up nearly two-thirds of the market, barely budged, rising a mere 0.3%.
New applications for building permits, an indication of future construction, fell 5% to a seasonally adjusted annual rate of 1.1 million.
Economists surveyed by The Wall Street Journal had expected September housing starts to reach a rate of 1.15 million and 1.16 million building permits having been issued.
Home construction figures can be volatile and subject to significant revisions. Tuesday’s report showed new-home starts for August were revised to a 1.7% decline, compared with an initial estimate of a 3% decrease.
Year-to-date, housing starts are up 12% and building permits are up 13%.
Housing construction remains subdued by historical standards even though other indications suggest the housing market may be firming. New home sales rose in July and August although sales have yet to reach their prerecession levels. Sales of existing homes, however, slipped in August, perhaps because of rising prices.
Low interest rates, a stronger job market and rising rents have led more people to look for homes to buy. But a shortage of supply in some areas combined with wages that have been slow to rise may make purchases difficult. That could be changing. Builders completed more housing units in September, on a seasonally adjusted annual basis, than at any point since November 2008.
Home builders remain hopeful, despite the uncertainty in the housing market. An index of home builder confidence released Monday by the National Association of Realtors rose to 64, higher than expected.
“The underlying story is that housing demand is quite strong, and builders are slowly but surely ramping up their groundbreaking to meet the need,” wrote Stephen Stanley, chief economist at Amherst Pierpont Securities.
Gregory Daco, head of U.S. macroeconomics at Oxford Economics, said the data “point to a slow and steady acceleration in single-family construction activity,” leading him to expect “moderate residential activity in the second half of the year and into 2016.”
Another gauge of the housing market will come Thursday when the National Association of Realtors releases new data on existing home sales.
Tuesday’s report showed housing starts rose a seasonally adjusted 25.4% between August and September in the West, and 23.4% in the Northeast. Starts were essentially flat in the South, rising 0.6%, and were down 12.2% in the Midwest.
