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First Cut: Starts of new homes in September retrace some, but not all, of August surge

Starts of new homes fell 9.4% in September from August to 1.256 million units (SAAR). The decline was expected after a surge of 15.1% in August from July. The decrease still leaves the number of homes started at a level among the best in 2019 to-date. The level was up 1.6% compared to a year-ago. If the level was below market forecasts, it should still not be read as a weak report.

The real eye-opener in the data was that single-family homes managed to eke out a 0.3% rise to 918,000, the highest since the 966,000 in January that marked the revival in housing that accompanied the ebbing of mortgage interest rates after a peak of 4.87% in November 2018 down to 4.46% in January. The Freddie Mac 30-year fixed rate was at 3.61% in September. The volatile multi-unit sector fell 28.2% to 338,000, not quite erasing the rise to 471,000 in August after 333,000 in July.

Starts were down across the board for regions. The Northeast dropped 34.3%, the Midwest 18.9%, and the South declined 4.0% while the West dipped 1.9%.

Permits issued didn’t lose too much ground with a 2.7% decline in September to 1.387 million units after the staggering 1.425 million in August. Year-over-year, permits were up 7.7%. Builders should have plenty of construction in the pipeline for the next few months.

Single-family permits were up 0.8% to 882,000 in September from 875,000 in August and have risen every month since April. Year-over-year, single-family permits were up 2.8%. The more variable multi-unit sector was down 8.2% in September to 505,000, but were up 17.4% compared to September 2018.

Permits were down 25.7% in the Northeast, 5.9% in the Midwest, and 2.9% in the South. However, permits climbed 10.2% in the West.

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