September housing startsU.S. housing starts registered their third straight monthly gain in September, unexpectedly rising 0.3% to a 610,000 annual rate -- providing additional evidence that homebuilding in the beleaguered U.S. housing sector may be bottoming. However, economists caution that monthly housing starts data contain a margin of error, and revisions can be large. In addition, they underscore that it can take three to five months for a trend to form, and retrenchments are possible.

A Bloomberg survey had expected September starts to dip to a 580,000 annual rate, from August's revised 608,000 rate, an improvement from the initially released 598,000. Housing starts totaled a 550,000 annual rate in July and hit a cyclical low of 477,000 in April 2009.

Single-Family Homes Up, Multifamily Down

A year ago, starts totaled a 586,000 annual rate, which means they're up 4.1% in the past year -- a slight improvement from August's 4% year-over-year rise. September housing starts increased in two regions, the Northeast (up 2.9%) and the South (up 4%), and dropped in two, the Midwest (down 8.2%) and the West (down 3.6%).

Also in September, starts of single-family homes increased 4.4% to a 452,000 annual rate, while apartment/multifamily starts plunged 9.7% to a 158,000 annual rate.

One negative in the September starts report concerned building permits -- considered a leading indicator of housing construction. They fell 5.6% to a 539,000 annual rate, the lowest level since April 2009.

A Large Hole to Fill

Despite the modest progress evident in September's housing starts data, investors need to keep in mind how far building activity fell during the 2007-2009 recession. Even excluding the home building mania of 2004-2006, when starts exceeded a 2 million-unit annual rate, starts are still below the 1.3 million-unit to 1.7 million-unit pace of the 1990s economic expansion and the 1983-1988 expansion.

So, even though housing starts have risen in the past year, they're still less than half what they need to be.

Of course, the major unknown concerns whether U.S. housing starts in the years ahead will approximate historical norms. The U.S. economy is undergoing structural change -- which is contributing to the nation's high unemployment rate. Historically, job creation -- a key to household formation -- has been a major factor in rising home sales. The U.S. economy will have to demonstrate that it can add about 150,000 to 200,000 jobs per month to both maintain the economic expansion, substantially lower the unemployment rate and keep housing starts and sales trending higher.

Clearly, that won't be easy, which is why it would be premature to declare an end to the U.S. housing sector's slump.


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otterdad48

I do not know about the rest of the country but here in Florida there is an over abundance of spec houses built into the bubble.

October 20 2010 at 4:26 AM Report abuse rate up rate down Reply
Robert & Lisa

These liberal writers bend every which way to support Obama and thugs. When we go communist, they'll have to get real jobs... Misery loves company.

October 20 2010 at 4:09 AM Report abuse +1 rate up rate down Reply
tsafa

This is completely retarded. Why build new houses when there are so many for sale. Part of the problem is that banks are bringing foreclosed property to market slowly to keep prices artificially high.

October 19 2010 at 2:37 PM Report abuse +1 rate up rate down Reply
1 reply to tsafa's comment
itacurubi

Perhaps because the existing ones are in the wrong location or because they are too big or too small. Remember that 90% housing glut is limited to -- at most -- a few dozen locations.

October 19 2010 at 2:45 PM Report abuse rate up rate down Reply
ajgorm

I have heard that in some areas foreclosed homes can be bought at 40 bucks per foot or less. Most new homes can not be built for less than $80.00 bucks a foot with cheap materials.. The truth is housing kept China and the banks employed too and now we will be living off the crumbs left behind.

October 19 2010 at 2:01 PM Report abuse rate up rate down Reply
wfreeberg

Think about the revenue streams with home construction. Land Owner for selling the property, Architects, lumber yards and building supply companies, and resources that receive pay checks for their labor.

October 19 2010 at 1:34 PM Report abuse rate up rate down Reply
chase5300

Marvelous news: just what we need, more houses on the market at prices too high for homeowners to buy. WHY is this good news?!!???!

October 19 2010 at 11:32 AM Report abuse +4 rate up rate down Reply