Today’s September housing construction report was one of those releases for which the headline numbers were completely misleading. Headline starts were down 9.0% and headline permits were up 6.3%, but those swings were totally due to extremely large moves in multi-family starts and permits. Single-family starts and permits data are more important and somewhat steadier than the multi-family data, and these showed 8.1% and 0.4% gains, respectively—quite a different story from what the headline data portray.
It is true that even the large gain in single-family starts merely kept that indicator within its range of the last 11 months. Last month, we concluded that the housing data were pointing relatively clearly to an ongoing downtrend in residential construction. With today’s gain in single-family starts, the trend looks more flattish, as indicated by the blue line in the accompanying chart.
However, even that flat trend is still a far cry from the uptrend that was in place over 2015 and that many economists expected to resume in the second half of 2016. So, even if today’s single-family starts print was above expectations, lately this sector has still been a clear disappointment to the consensus forecast.
Meanwhile, with today’s huge swings in multi-family starts and permits—down 38.0% and up 16.8%, respectively—the multi-family data are a real mess. Maybe the multi-family starts decline reflects hurricane weather effects, or maybe it is due to some other anomaly. National multi-family construction trends were already looking flattish prior to today’s release, and today’s news merely adds some downside risk to that outlook.
Keep in mind that we are not looking for sharp declines in residential construction. Rather, our emphasis has been merely that housing would not be providing any boost to economic growth in the next few quarters. Underneath the wild swings in the headline data, today’s news is consistent with that outlook.