The federal government's new numbers on housing starts have just come out, and the headline at first sounds wildly positive. This morning's print was in fact positive, but when we dig down, we see that single-family homes only went up 0.3% in September, to an annual rate of 740,000. The apartment boom continues at an incredible pace, with multifamily starts rising 17% to a pace of 454,000.

The modest increase in single-family home starts in September was not a big surprise. It is consistent with our forecast for the entire year, up 10%. Looking forward at 2016, we expect single-family starts to increase at a slightly faster pace, consistent with our forecast of better job creation.

The pace of new home construction has increased, as shown by the housing starts data, but "completions" have not risen as rapidly. This is of concern to the builders, because that is when the builder gets paid. You have to complete the house before you can close it.

Homebuilders in many markets around the country are contending with labor shortages. This has lengthened the "build time" for a new home. Some builders have already wrapped up their fiscal year, but for those builders who have not, they are looking for ways to get more homes closed soon.

In Phoenix, the build time for a basic new home has gone up from three months early this year to six months! This impacts revenue in the current fiscal year.  

While some markets are under labor constraints, you also have other kinds of delays, including weather related delays in other markets. Throughout Texas, for example, severe rainfall has caused delays in home completions and in lot deliveries (lot "deliveries" is a measure of the number of homesites newly developed and prepared for/by builders).  During a market cycle when there is a general scarcity of good lots, as we are in now, this is a particularly challenging problem.