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Housing Starts Slip, But The Recovery Remains In Place

 December 20, 2012 01:49 PM


(By Mani) Housing starts fell 3.0 percent in November to an 861,000-unit pace. Single-family starts fell 4.1 percent and multifamily fell 1.0 percent. Even with November's drop, the past three months were the best in four years.

The drop was largely expected and followed strong gains in October and September. The monthly residential construction data bounced around quite a bit, and the seasonal adjustment factors for November tend to be rather large. That said, the November data were also likely partly impacted by Hurricane Sandy.

Housing starts fell 5.2 percent in the Northeast and permits declined 6.2 percent. The number of privately-owned housing units under construction also fell 1.1 percent.

The Northeast was the only region that saw declines in permits and the number of units under construction. The entire drop in housing starts in the Northeast was in multifamily units.

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"However, even with the declines in building activity tied to Hurricane Sandy, November's 4.1 percent drop in single-family housing starts hardly comes as a surprise," Wells Fargo economist Mark Vitner wrote in a note to clients.

Single-family starts had been running ahead of permits for the past three months, which suggested that a modest pullback was in order. The largest drop was in the West, where single-family starts slumped 15.4 percent. The West had the largest gap between starts and permits the prior month.

Meanwhile, the Midwest saw activity pull a bit back, with single-family starts tumbling 9.3 percent in November. By contrast, single-family starts rose 1.4 percent in the South and increased 12.2 percent in the Northeast.

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Multifamily starts fell 1.0 percent in November, following gains of 18.2 percent in October and 19.3 percent in September.

"All of the decline in multifamily units occurred among projects with 2 to 4 units, which comprises a tiny fraction of overall housing activity," Vitner wrote.

Even with November's gain, starts of projects with 5 units or more are still trailing permits, and permits are still in a solid uptrend.

"We would be hesitant to characterize November's 3.0 percent drop in housing starts as anything more than statistical noise," Vitner said.

Permits rose 3.6 percent during the month and, even though the gain was in multifamily units, permits for single-family homes remained essentially unchanged following gains through most of this year. On a year-to-date basis, single-family starts are running 24.4 percent over their year-ago pace while multifamily starts are up 33.8 percent.

The latest NAHB/Wells Fargo Home Builders survey also shows that builders expect activity to strengthen. The homebuilders' index rose 2 points to 47 in December, reflecting gains in sales and buyer traffic.

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