The Home Buyer's Korner

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November 23rd, 2015

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Housing Starts Dropped 11 Percent in October

New Home Sales

The HMI was an interesting prelude to last week’s release of Building Permits and Housing Starts. The National Association of Home Builders (NAHB) Housing Market Index (HMI) is a gauge of builder opinion on the relative level of current and future single-family home sales. It is a diffusion index, which means that a reading above 50 indicates a favorable outlook on home sales; below 50 indicates a negative outlook. The latest reading of 62, a decrease from the previous month’s upwardly revised figure, was below most analysts’ forecast of 64.

The HMI correlates fairly closely with broad measures of consumer confidence. Here is a pair of overlays with the Michigan Consumer Sentiment Index and the Conference Board’s Consumer Confidence Index.


Recent data from the U.S. Department of Housing and Urban Development and the Commerce Department, showed a steep drop in multifamily production, U.S. nationwide housing starts fell 11 percent to a seasonally adjusted annual rate of 1.06 million units in October 2015.

Multifamily starts declined 25.1 percent to a seasonally adjusted annual rate of 338,000 units, while single-family production edged down 2.4 percent to 722,000 units. Both sectors posted permit gains.

With permits continuing to rise, it’s consistent with the HMI index and as builders’ have continued optimism in the housing market. Even though starts dropped in October, they have stayed above the one million mark for seven straight months, and that is the longest streak in almost seven years.

This month’s decline came mostly from the multifamily sector with an expected adjustment after an unusually high September, as well as the storms and flooding affecting single-family production in the South.

Combined single- and multifamily starts rose in the Northeast and Midwest, with respective gains of 10.2 and 15 percent. Meanwhile the South fell 18.6 percent and the West dropped 16.2 percent.

Overall permit issuance rose 4.1 percent to 1.15 million units in October. Multifamily permits rose 6.8 percent to a rate of 439,000 while single-family permits increased 2.4 percent to 711,000.

Regionally, the Northeast, Midwest and South posted respective permit gains of 5.9 percent, 2.4 percent and 7.5 percent. The West fell 2.6 percent


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