Housing permits reached a new 14-year low in October as housing starts, enhanced by a surge in multi-family unit construction, made a modest jump according to a joint report from the Commerce Department and the U.S. Department of Housing and Urban Development (HUD) on Tuesday morning.
Total permits for October fell 6.6 percent to an annual pace of 1.18 million from 1.26 million in September. It's the lowest seasonally-adjusted number of permits in a single month since July 1993. Annually, the numbers are down nearly 25 percent. Single-family permits dropped 8 percent.
Overall, housing starts increased by 3 percent from September but single-family unit starts dropped 7.3 percent. Annually, total starts are down 16.4 percent. A 44-percent jump in multi-family starts accounted for the increase and according to Patrick Newport, an economist for Global Insight, a Massachusetts-based economic and financial analysis firm, the statistics for housing starts tend to be deceptive.
"It is not a very well measured number," Newport told BUILDER Online. "These numbers [housing starts] are annualized, so if you have a developer who starts a unit with 100 apartments, that number counts as 1,200 [apartments] for that month. [Housing starts] tend to bounce around from month-to-month and distort what is really happening."
"[October's] jump partially offset September's 134,000 [35.9 percent] unit drop. The multiple-unit estimates are noisy, and often mask underlying trends, which they did in October," Newport added.
Regionally, housing starts were up 21.1percent in the Midwest, 8.5 percent in the Northeast, and 5.8 percent in the West. In the South, starts dropped 4.6 percent. "October's numbers were dismal, despite the headline increase in starts," Newport commented.
But Carl Reichardt, a Wachovia Capital Markets senior equity research analyst, says Tuesday's report might be the start of addressing the industry's inventory problems.
"The marked fall in single-family construction activity continues apace in October, but this stiff tonic is what's needed to cure the industry's substantial oversupply problem, in our view," Reichardt said in a financial note. "Both the starts and permits are on their 19th consecutive month of year-to-year declines, bringing their respective paces to levels running 46 percent and 48 percent below the peak rates."