Housing Starts Feel a Chill in October
Housing activity showed early signs last month of cooling off from this year’s torrid levels with declines in both new-home construction and building permits, according to a Nov. 17 report by the Commerce Department.
Total housing starts dropped 5.6% in October to a seasonally adjusted annual rate of 2.014 million units, down 2.3% from a year earlier. But starts for the first 10 months of the year were up 5.3%.
Single-family home construction dipped 3.7% to 1.704 million units last month, 2.3% above the pace of a year earlier; and on a year-to-date basis they were up by 6.3%.
“Builders continue to operate at a healthy pace, but we are well aware that some slowing of demand is inevitable following the record-breaking sales activity that has prevailed recently,” said NAHB President Dave Wilson. “NAHB’s November survey of single-family builders showed a significant slowdown of sales activity.”
“It appears that housing starts and permit issuance hit their peaks during the third quarter and that housing market activity has begun to cool,” said NAHB Chief Economist David Seiders. “Rising house prices and interest rates have combined to erode housing affordability and consumers also appear to be concerned about the cost of heating their homes this winter.”
“This cooling-down period should extend into 2006 but not lead to a major contraction in the housing markets,” Seiders continued. “NAHB’s forecast shows a 5.5% decline in housing starts for 2006, basically retracting the increase expected for this year.”
Multifamily housing starts dropped 14.8% last month to a seasonally adjusted pace of 310,000 units, 21.7% below the pace of a year earlier.
Regionally, construction of new homes and apartments in October was down 0.5% in the South, 7.5% in the Northeast, 10.5% in the Midwest and 10.8% in the West.
Issuance of total building permits decreased 6.7% last month to a seasonably adjusted rate of 2.071 million units. Single-family permit issuance was down 4.9% to 1.681 million units, and the pace of multifamily permits dropped 13.7% to 390,000 units. The backlog of unused permits declined by 4.8% in October, following a substantial increase earlier this year.
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