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Housing Starts: Sharp Decline in Multi-family Masks Trend

October 19, 2016

Bottom Line: An unusually sharp decline in multi-family housing starts masked solid gains in single family housing starts in September. Multifamily starts, often volatile, fell 38%, leading total housing starts down 9% to a 1,047k annual rate in September, sharply below expectations for an increase to 1,175k. There were modest upward revisions to the prior month, taking the total to 1,150k in August. There were sharp gains in multi-family building permits, though, which suggests that some of this month's declines in that sector should reverse in October. Given the volatility of the multifamily sector, there is not enough in this report to suggest the steady uptrend in housing starts is changing yet.

Housing Starts FELL by 9.0% in September to 1047k, compared with market expectations for an increase to 1175k. Meanwhile, the prior month was revised slightly higher from 1,142k to 1,150k. Housing starts have been slowly climbing, albeit amid substantial volatility, since reaching their cyclical nadir in April 2009 and are now 11.9% BELOW their year ago level. However, they are still a sharp 53.9% BELOW their January 2006 peak.

Single Family Housing Starts ROSE by 8.1% to 783k. Single family housing starts are 5.4% ABOVE their year ago level but still 57.0% BELOW their January 2006 peak.

Multifamily Housing Starts FELL by 38.0% to 264k. Multifamily starts are now 40.8% BELOW their year ago level.

The starts in Northeast saw sharp declines, down 36.0% and are 28.9% below their 12-month average.

Article by Contingent Macro Advisors