How to Think About the New Housing Data

November 17, 2016

The new data on housing starts just came out, showing a 25.5% increase in the month of October (seasonally-adjusted percent increase from September, which was revised upward). Although most of the improvement was due to a 74.5% increase in multifamily construction, single-family starts increased nicely as well (up 10.7%).

I hasten to point out, however, that the out sized increase in multifamily was on the heels of a massive drop in multifamily in September. Quick math, to put it in to perspective: if you average out the last two months, you end up with a below-trend reading of 350,000 multifamily starts. Conclusion: monthly data are noisy, but the apartment boom is winding down.

The increase in single-family starts reflected strength in all four quadrants of the country. Builder sentiment remains fairly strong, and suggests continued increases in starts in the future as home ownership rates gradually improve. Data from the National Association of Home Builders show that builder confidence held steady in November at a level of 63 (a number over 50 means that more builders view conditions as good than poor).

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