Housing starts fell last month amid Hurricane Florence
New-home construction fell in September on a decline in the South that may reflect disruptions from Hurricane Florence, government figures showed Wednesday.
Residential starts dropped 5.3% to a 1.201 million annualized rate (the estimate was 1.21 million) after a downwardly revised 1.268 million pace in the prior month. Multifamily home starts fell 15.2%, while single-family starts declined 0.9%. Permits, a proxy for future construction of all types of homes, slipped 0.6% to a 1.241 million rate (the estimate was 1.275 million) after a 1.249 million pace.
Analysts had forecast a decline in housing starts after Hurricane Florence, which made landfall in North Carolina on Sept. 14, caused damage and flooding throughout the Carolinas. Those states are part of the report's South region, which accounts for about half of starts and showed a 13.7% drop from the prior month. Hurricane Michael, which struck Florida and other Southeastern states last week, will probably affect activity in October.
While the impact of the storms on housing data is likely to be temporary, the decline in starts largely reflected slower construction in multifamily housing, a category that tends to be volatile. In addition, permits for single-family homes rose 2.9% last month, the most in a year, on gains in the Northeast and West, indicating builders have a steady pipeline of construction.
That indicates housing could contribute to the economy toward the end of the year as consumer demand, helped by a solid job market, lower taxes and post-storm rebuilding, overshadows headwinds including rising mortgage rates and property prices.
On the other hand, permits for multifamily housing fell to the lowest level since March 2016, suggesting that an apartment glut in some cities may be making builders more hesitant.
A decline in lumber prices from a record earlier this year may also be providing some comfort to developers. A gauge of homebuilders' confidence rose in October for the first time in five months, according to a National Association of Home Builders/Wells Fargo report released Tuesday.
Housing starts have been hovering near their current level for the last couple of years without a shift toward a meaningful upward trend, so September's decline should not be fully blamed on hurricane disruptions. As activity rebounds, residential housing construction should get a modest boost going into the end of the year, but it is not expected to change the recent dynamics in the housing sector. No major acceleration in housing construction activity is expected.
Single-family home starts fell to an 871,000 rate from 879,000 the prior month. Groundbreaking on multifamily homes, such as apartment buildings and condominiums, dropped to an annual rate of 330,000. The Midwest region also posted a decline in starts, while they rose in the Northeast and West to their highest levels since March. The report shows a wide margin of error, with a 90% chance that the September figure on housing starts ranged from a 16.6% drop to a 6% gain. The report was released jointly by the Census Bureau and Department of Housing and Urban Development in Washington.