September housing starts below expectations

17 October, 2018

Scott Volling
Partner, PwC US

Housing starts and permits for September came in below expectations, continuing a lackluster four-month trend. Starts were 1,201,000, 1.6% below the consensus of 1,220,000 and 5.3% below last month’s revised number of 1,268,000. Permits came in at 1,241,000, 2.4% below the consensus of 1,272,000 and 0.6% below last month’s revised 1,249,000. While builder sentiment unexpectedly rose by one point yesterday – attributed to a multi-month trend of lower lumber prices – the challenges present in the market that have depressed starts and permits since June continue. With mortgage rates now at the symbolic level of 5% and trending upward, it is difficult to predict a catalyst in the market that may drive starts and permits materially higher in the short term.

While September results seem to reinforce the ongoing headwinds facing builders, regional results indicate that weather may have also had an impact. The South region, which is the largest of the four regions in terms of building activity, saw starts decline by 13.7%, likely as a result of Hurricane Florence. Had the South been flat month over month starts would have exceeded expectations. As we look ahead to October, it is likely Hurricane Michael may also impact starts for the South, though the impact should be materially less given the large markets of Jacksonville, Orlando and Miami were unscathed.