Wells Fargo Reports: Housing Starts Plunge Unexpectedly in September

Following a sharp decline in August, housing starts fell to its lowest level since early-2015 in September. The decline was concentrated in multifamily, while single-family rebounded. Permits jumped 6.3 percent.

Headline Starts Falter, but Permits Point to Gains

• Consensus estimates projected a partial reversal in housing starts in September following a sharp decline in August. That said, housing starts tumbled 9.0 percent in September to a 1.047 million-unit rate. However, all of the weakness was concentrated in multifamily, which fell 38.0 percent during the month, while single-family rose 8.1 percent. Strength in purchase applications and permits suggest continued gains.

Builder Sentiment Still on Track

• Housing permits, which typically lead housing starts and are far less volatile, rose a solid 6.3 percent. With the level of permits running ahead of starts, we expect starts to pick up in the coming months. Although builder confidence retreated in October, the trend still suggests upward momentum in single-family construction. The NAHB/Wells Fargo homebuilders’ survey rose to 62.3 on a three-month moving average basis.