Housing Construction Increases In September

Housing starts rose 6.3% last month, primarily due to construction of multi-family units, according to this morning's update from the US Census Bureau. The single-family slice of starts, by contrast, rose just 1.1% last month vs. August. The multi-family growth bias looks set to persist, based on the September data for newly issued housing permits. New permits overall rose a tepid 1.7% last month as single-family permits retreated 0.5%; fresh authorization to build multi units of five or more, however, jumped 7.0% in September vs. August. It's fair to say that the housing market's growth rate has slowed in general and that's not likely to change anytime soon. But the key point in today's report remains upbeat, albeit moderately so via a gentle tailwind that's blowing in residential construction activity.

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The trend doesn't look impressive, at least not by recent standards. But it's clear that the bias for expansion remains intact. The year-over-year pace for housing starts accelerated last month to 17.8%–more than double the annual rate of increase through August. But the yearly gain for permits decelerated to a sluggish 2.5% rise, which suggests that the growth in starts will moderate in the months ahead.

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The fact that housing is still expanding is the main takeaway in today's release. It's been clear for some time that the recovery in this crucial corner of the economy has been trending lower. The latest numbers suggest a degree of resiliency, however. The upbeat trend is even more encouraging in the wake of yesterday's surprisingly strong numbers for initial jobless claims and industrial production.

"The trend in starts continues to be up," the chief economist at Nationwide Insurance tells Bloomberg. "As the job market's gotten better, as the mortgage rates have remained low and in the last week gone even lower, the underlying demand for single-family homes has improved," according to David Berson.

It remains to be seen if the ill winds blowing in from Europe will take a sizable bite out of the US expansion in the weeks and months ahead. But based on this the latest numbers, it's clear that the American economy remains in a moderate growth mode. As a result, it's still reasonable to argue that business cycle risk for the US remains low.