September housing starts came in 9 percent below August and 12 percent below September 2015, according to the U.S. Census, but those big drops belie a huge improvement for the market, at least in this monthly read.
Those numbers are totals, based on both single-family homes, which are desperately needed, and multifamily apartments, which have seen a construction boom over the last three years.
The drop in housing starts was driven entirely by a big swing lower in multifamily construction. That may be a one-month phenomenon, because numbers on multifamily can be swayed dramatically by just a few large-scale apartment developments.
“Bottom line, the bizarre plunge in multifamily starts is inexplicable but the rise in permits says it was an outlier,” said Peter Boockvar, chief market analyst with the Lindsey Group.
Whatever the case, the apartment market is starting to cool slightly, as thousands of brand new, albeit mostly luxury, units come on line and occupancies start to level off from their climb to historic highs. Construction reached a cyclical high last year and is only moderating slightly this year.
Single-family home construction, which is what the housing market desperately needs, rose 8 percent for the month and 5 percent from a year ago. That is a positive for a sector that has been wildly conservative following the worst crash in history.