Durable goods orders finally bounced back in October and rose 0.4% from September after two months of declines. Moreover, September losses are now smaller than initially reported. Gains were concentrated in defense aircraft and parts, reflecting the need to ramp up to deal with escalating tensions in the Middle East including the bombing of ISIS. We also saw gains in the motor vehicle industry Read More
Single-family housing starts accounted for 696,000 starts, up 28,000 from September. That, coupled with the fact that the revision brought September’s total into the black by 27,000 bodes well for the economy; single-family homes stimulate much more economic activity than multifamily rental units. On the flipside, multifamily starts came in at 313,000 for October, 57,000 below September. The losses in multifamily starts were concentrated in the Northeast and the West, while the South was the only region to move higher. The South continues to outperform across the board; that region has been the outright leader in housing starts, both single- & multifamily, since the trough, which occurred during the second half of 2009. This is due to builders taking advantage of relatively cheaper land as well as building for the shifting population trends towards the South.
Total housing starts, including single-family and multifamily units, backtracked in October, coming in at 1.009 million units; this figure is 29,000 less than the upwardly revised number for September. The drop is in line with the weakness seen in the National Association of Home Builders (NAHB) housing market index, which showed weakness across the board for October.
Housing permits remain a positive sign for housing starts, along with the builders’ index. Permits for October came in 49,000 higher than September’s level. Granted, all permits do not necessarily translate into completed homes; still, this back-to-back increase shows that expectations remain positive.
Bottom Line: There were several positives to draw from this release. Single-family starts were revised up for September and then increased an additional 28,000 in October. Also, permits rose 49,000 in October, which leaves many projects still in the pipeline in the coming months. The NAHB index also showed a rebound in both September & November figures. But in the face of these positive signs, the recent cold snap could dampen November’s starts data because this bitter cold has hit many parts of the nation quite early; that could negatively impact the seasonal adjustments.