Credit: Infrogmation courtesy Wikimedia Commons
Housing in New Orleans's Upper 9th Ward.
This morning, the U.S. Census Bureau and the Department of Housing and Urban Development released their monthly joint report on the state of the housing market. In September, the construction industry saw a big growth in housing starts as well as new permits. Housing starts came in at a seasonally adjusted annual rate of 872,000, which is 15 percent above August’s 758,000 and 34.8 percent above a year ago. New building permits came in at a seasonally adjusted 894,000, which is 11.6 percent above August’s 801,000 and 45.1 percent above a year ago.
For an industry as decimated as the construction sector, which has been floundering since the financial crash of 2008, and even a bit before, this is clearly big news. Housing starts have decreased precipitously since 2006—the peak of the housing bubble—through the financial crisis in 2008, and then they finally bottomed out in 2009. Since then, the numbers have been stabilizing more so than growing. The first eight months of this year saw housing start numbers staying within the 700,000 to 760,000 range. Even at 872,000, housing starts are still well below what is seen when the housing market is healthy.
Taking a closer look, single-family housing starts did well, but not nearly as well as multifamily housing starts. Single family starts were up 11 percent from August, but multifamily starts were up 25 percent. And if you look at the nation’s four regions, the South and West grew the most (up 19.9 percent and 20.1 percent, respectively), with the Midwest treading water (up 6.7 percent), and a decrease in starts for the Northeast (down 5.1 percent). This tracks very closely with what we’ve been seeing from the AIA’s Architecture Billings Index (ABI) in recent months. In August, the ABI showed us that the South and West were seeing more construction, the Northeast and Midwest less, and multifamily construction was leading all industry sectors in growth.
Where did this burst in activity come from? Consumer spending grew more than expected in September, producing the best two months of sales in two years, and industrial production rose in September after a decrease in August. So the housing numbers could be part of a larger recovery that is finally catching hold.
Other analysts are looking outside of the normal business cycle. Matthew Yglesias at Slate views today’s housing numbers as a clear sign that the Federal Reserve’s recent QE3 announcement has had a big impact on the economy. (The Economist’s Ryan Avent also covered this topic for ARCHITECT after Ben Bernanke announced it.) But Brad Plumer at the Washington Post’s Wonkblog is wary of that conclusion because the Fed announced QE3 in the middle of the month, but the Census Bureau doesn’t release its figures in weekly installments, so that causality would be tough to track. On top of this, the Census’s numbers come with a pretty large margin of error. (Fifteen percent, plus or minus 12.1 percent, is not the type of statistical certainty that lets a numbers guy sleep soundly at night.)
Whatever the full story, these numbers for housing starts and permits are great news for the construction field, which has been hit the hardest of any sector in the past few years, has seen the size of its workforce dwindle since 2007, and has been waiting patiently for its fate to turn around. With today’s news, maybe it finally has.