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Housing starts fall following major storms


Overall U.S. home starts fell in September, the first month of data following the string of major storms in the South and Gulf regions.

Housing starts ran at an annual pace of 1.13 million, down 4.7 percent from the August estimate, the U.S. Census Bureau reported. Starts were still running 6.1 percent above the annualized pace a year earlier, Census data suggests.

housestartsSingle-family starts also fell by 4.6 percent over the month to an estimated annual pace of 829,000. Single-family starts were up 5.9 percent compared to the pace set in September 2016, however.  Multifamily starts ran at 286,000, down 6.2 percent from August, but up 7.9 percent year over year.

Economists were expecting starts to fall in the wake of the devastating storms Harvey in southeast Texas and Irma in Florida and several Gulf states. In the South, starts were down 9.3 percent over the month. Single-family starts also fell by 15.3 percent in the South region.

First American's Chief Economist Mark Fleming said that home building in the South and other parts of the county could be hampered as construction workers and the trades are diverted away to do repairs and renovations. The number of residential construction workers declined in the latest jobs report.  

"Hurricane Harvey significantly damaged or destroyed more than 30,000 homes and Irma similarly damaged over 4,000 homes," Fleming said. "The challenge of finding skilled labor to build new homes is now being exacerbated by the demand for that same skilled labor to renovate damaged homes."  

Overall starts were also down over the August level by 9.2 percent in the Northeast and 20.2 percent in the Midwest, but were up 15.7 percent in the West.

“The one month fall in new home construction, especially in the South region in light of Hurricane recovery, is understandable,” said National Association of Realtors Chief Economist Lawrence Yun. Yun said he was disappointed and surprised that permitting activity, an indicator of future starts, fell in the West region. Permitting in the West was down 9 percent over the month and was also down nearly a percentage point over the last year’s pace.

Portions of the West have experienced some of severest housing shortages and rapid price gains.

“Home prices have been rising too fast in the West, and several metro areas are in dire need of new home construction,” Yun said. “If housing shortages continue, along with the commensurate affordability challenges, then expect new job creation to begin shifting away from the West to other parts of the country."


 

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