Hurricanes Pummel New-Home Production
Fewer new homes are in the works, and economists say recent hurricanes that struck the South brought down the latest numbers.
Housing starts dropped 4.7 percent in September to a seasonally adjusted annual rate of 1.13 million units, the Commerce Department reported this week. Broken out, single-family production fell 4.6 percent month over month to 829,000 units, with the bulk of the decline occurring in the hurricane-ravaged South. The South posted a 15.3 percent decline in single-family production last month. All other major regions of the U.S. posted gains in the single-family sector.
“Looking at historical data, there is a pattern of decreased production immediately following natural disasters but economic fundamentals will drive the longer-term trend in housing starts,” says Michael Neal, senior economist at the National Association of Home Builders. “Nationwide, single-family permits are up this month, and year-to-date single-family starts are 9.1 percent ahead of their level over the same period last year—two indicators that this sector continues to improve.”
Regionally, combined single- and multifamily housing starts rose the most in September in the West, posting a 15.7 percent month-over-month increase. Multifamily starts pulled down overall production numbers by 9.2 percent in the Northeast and 20.2 percent in the Midwest, however.
Housing production will likely face a decrease in coming weeks as overall permit issuance—a gauge of future construction—dropped 4.5 percent in September. The West posted the largest decrease in permits with a 9.2 percent drop in September; the South posted a 5.6 percent decrease. The Midwest eked out a 0.5 percent increase in permits and the Northeast saw a 9.2 percent rise.
“The one-month fall in new-home construction, especially in the South region in light of hurricane recovery, is understandable,” says Lawrence Yun, chief economist at the National Association of REALTORS®. “What is frustrating and hard to comprehend is the sharp drop in housing starts in the West region. Home prices have been rising too fast in the West, and several metro areas are in dire need of new-home construction. If housing shortages continue, along with the commensurate affordability challenges, then expect new job creation to begin shifting away from the West to other parts of the country.”