The Department of Commerce earlier this morning issued materially better-than-expected news on the housing front, as that long-beleaguered sector reported that housing starts soared by 15.0% last month, to a seasonally adjusted annual rate of 658,000 homes. The companion building permits data showed that such indications of future construction activity, however, had dipped by 5.0% in September. Both of those metrics, though, are being compared to results issued in the prior month. On a year-to-year basis, both series showed nice recoveries.
As noted, starts came in at an annual run rate of 658,000 units last month. That was up from August's 572,000 annual unit rate, and was the higher level of the year. Prior to the September data, the peak for any month had been January's 636,000 annual unit rate. The level of starts had fallen as low as 518,000 homes in February. In fact, housing starts were below 550,000 units in February, as noted, and also in April.
Meanwhile, as indicated, building permits, which are more of a leading indicator in this area, fell last month to 594,000 units from 625,000 homes in August. Indeed, the September level of permits was the lowest since April, when building permits had come in at 563,000 homes. Clearly, the report was mixed.
However, while the increase in starts was certainly encouraging, it must be remembered that at its peak, in late 2005 and early 2006, that more than 2.3 million homes had been started on an annual basis. Thus, we are still down almost 75% from that peak. We definitely have a long ways to go before we have a serious recovery in this ailing sector. Also, housing completions were up 2.1% last month. Obviously, that last item is a backward looking statistic. The 647,000 homes completed last month, on an annualized basis, however, was still the higher level in more than a year.
As for a regional breakdown in starts, we saw that each of the four regions reported an increase in September, with the Northeast, the smallest locale, up 12.7%. The Midwest showed a gain of 9.3%; the South, the biggest region, posted a 15.7% gain; while the West was up 18.1%. The South, it should be noted, had 339,000 of the 658,000 homes started last month, or 51.5% of the annualized total of homes under construction.
All in all, it was a decent report, but again underscores just how far we have fallen from the irrational exuberance of the last decade, and how far we need to rebound to even suggest that this sector is in a durable recovery.

At the time of this article's writing, the author did not have positions in any of the companies mentioned.