Privately-owned housing starts in October were at a seasonally adjusted annual rate of 519,000, 11.7 percent below the revised September estimate of 588,000, according to data from The U.S. Census Bureau and the Department of Housing and Urban Development.
"Home builders continue to be very cautious about starting new projects at this time," said Bob Jones, chairman of the National Association of Home Builders (NAHB) and a home builder from Bloomfield Hills, Mich. "That said, in markets where consumer demand for new homes is reviving, builders are finding it almost impossible to obtain construction financing, and this frustrating situation is producing an unnecessary drag on both new home production and economic growth."
"October single-family starts and permitting activity remained essentially in line with the third quarter's trend," noted NAHB Chief Economist David Crowe. "What this tells us is that the market is running at a steady, but slow, rate following the downturn that took place upon expiration of the home buyer tax credit program and the economic slowdown this summer. Today, builders are just starting to report some improvement in buyer demand, which should gradually translate into more sales activity, and more starts, as the economy strengthens. The great concern is that this positive momentum will be stifled due to builders' inability to obtain financing for new construction at a time when inventories of completed new homes are very thin."
A report to be released by NAHB later today will highlight the extent to which much of the U.S. single-family housing market is underbuilt following the severe decline in production that has taken place since 2006. This finding underscores the concern that demand for new homes could quickly overwhelm supplies as economic conditions improve.
Starts activity was mixed across the nation in October, with gains of 12.9 percent and 1 percent reported in the Northeast and Midwest, respectively, and declines of 13.4 percent and 30.5 percent reported in the South and West, respectively.
Permit issuance, which can be an indicator of future building activity, showed virtually no change in October, with a 0.5 percent gain to a seasonally adjusted annual rate of 550,000 units. This lack of movement was reflected in both the single-family and multifamily sectors, with a 1.0 percent gain recorded in the former and a 0.7 percent decline registered in the latter.
Regionally, permit activity showed no change in the Northeast, a 14.3 percent gain in the Midwest, a 3.4 percent decline in the South, and a 0.9 percent decline in the West.