Housing Starts Tumble -10.2% MoM / Permits fall -7.3% MoM

A larger than expected decline in housing starts (-10.2% MoM, -30.8% YoY) in September, mainly due to a massive -34.3% drop in multi-family starts - townhouses, condos and apartments. Single-family starts only fell -1.7% MoM. Both single and multi-family starts have fallen 31% YoY. Housing starts have now fallen to a 14 year low (March 1993), which should help to reduce new inventory as tighter credit conditions and falling house prices reduce demand.

The decline in starts was led by a -28% MoM drop in the Midwest, followed by declines of -12% MoM in the South and -10% MoM in the West. In contrast the small Northeast region had an outsize +45% leap in new home starts last month after experiencing a large drop the prior month. Year-over-year declines in starts are large for all regions but the Northeast.

Housing permits also fell much more than expected, declining -7.3% MoM (-25.9% YoY). The decline was fairly evenly split between single-family (-7.1% MoM) and multi-family (-7.7% MoM). Housing units authorized, but not yet started, fell -4.2% MoM.

Housing under construction fell -1.4% MoM (-15.5% YoY). Housing completed fell -8.2% MoM (-31.1% YoY). All of the decline in completed homes was in single-family which fell -11.6% MoM (-34.9% YoY) while multi-family rose +6.9% MoM (-12.4% YoY).

This data reflects the poor prospects homebuilders displayed in their record low confidence index this month (18) as buyer cancellations of existing orders continue to rise. The housing market remains in distress, and the slowdown in building is a healthy sign of retrenchment to help reduce home inventories as rising foreclosures add additional houses to the market, and further reduce home prices. Permits remain well below starts. A report on architectural commissions released today also indicates the pipeline of demand for new home designs is also drying up.