Beating forecasts for lower-than-expected housing starts, builders put up 15 percent more new homes on a seasonally adjusted basis than predicted in September, the most since April 2010.[IMAGE]
The hitch: Multifamily residential construction drove the numbers.
The ""Commerce Department"":http://www.commerce.gov/ reported that ""housing starts in September"":http://www.census.gov/const/newresconst.pdf rose above August estimates for 572,000 units, hitting an annual 658,000 on a seasonally adjusted basis. The numbers rose on a year-over-year basis to perch 5.7 percent above starts recorded in September last year.
At the same time, permits for privately-owned housing units dropped last month at a seasonally adjusted annual rate of 594,000, reflecting a 5-percent fall below August forecasts.
The jump in housing starts follows a ""4-point rise in homebuilder confidence"":https://themreport.com/articles/nahb-homebuilders-more-confident-despite-outlook-2011-10-18, reported Tuesday by the ""National Association of Home Builders"":http://www.nahb.org/ -[COLUMN_BREAK]
the biggest gain in sentiment since the expiration of the federal homebuyer tax credit in April last year.
Writing in a widely circulated note, ""Paul Dales"":http://www.capitaleconomics.com/staff/global-economics/paul-dales.html, senior U.S. economist with ""Capital Economics"":http://www.capitaleconomics.com/, said the spike in starts ""suggests that housing may finally be helping the wider economy,"" adding the caveat that ""household formation is still too low and the excess supply is still too high to warrant a major rise in homebuilding.""
He added that the surge in starts may not sustain itself over the long haul, given the slide in mortgage applications to their lowest dearth since 1996 last week. He also forecasted that multifamily starts may well ease over the course of the month.
""Ryan Sweet"":http://www.economy.com/cnflow/bios.asp?author=149, a senior economist with ""Moody's Analytics"":http://www.moodysanalytics.com/, tells _MReport_ that ""the volatile multifamily segment has really driven the overall gain in housing starts, with people opting more for renting than buying. People are sitting on the sidelines waiting to sit out the housing correction.""
He says that scuttled permits from September signal stilted residential construction over the remainder of 2011 and into next year.
""The foreclosure pipeline is still very full,"" he says. ""Until we work off shadow inventory, homebuilders are going to hold off in terms of construction.""
""[T]here is a slim chance of a significant and sustained surge in homebuilding when household formation remains low and when there is still plenty of excess supply to be absorbed,"" Dales said. ""The upshot is that the economy will have to continue to cope without much support from housing for some time yet.""