Housing Starts and permits declined in October

Summary

Hurricanes hit housing construction

Total housing starts fell 3.1% during October, the second straight monthly decline. A pull-back in single-family starts dragged on the topline number. Although the recent spike in mortgage rates may have led to some caution on the part of home builders, the adverse impacts of Hurricanes Helene and Milton look to be the primary culprit behind the surprisingly acute drop. Single-family starts fell sharply in the South region, significantly underperforming most other regions except for the Northeast. Single-family permits, which are less-sensitive to weather changes, improved modestly in both the South and the nation as a whole.

In the multifamily category, starts jumped 9.6%in October, ending a two month string of declines. Multifamily starts are highly volatile on a monthly basis, and October's drop in permits better reflects the broad weakening in multifamily development that has occurred over the past several years alongside tighter credit conditions and heavy influx of new deliveries.

Looking ahead, home bulders appear unfazed by the leg-up in financing costs and encouraged by the results of the recent election. The NAHB Housing Market Index jumped to 46 during November, the highest reading since April. Builders expressed optimism that a more friendly regulatory environment could be beneficial to operating conditions. While more leniant regulations may increase confidence and help support activity, potential changes to trade and immigration policy represent headwinds for residential construction moving forward.

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