Chart of the day: U.S. housing starts and permits slowed amid shortages

Housing starts and permits stayed below expectations in September, signaling a supply slowdown because of shortages of materials and labor. The headline figure for housing starts fell by 1.6% on the month to 1.555 million units annualized because of a drop in multifamily units while single-family starts—the more important series—remained unchanged, according to government data released on Tuesday. Overall housing starts continued to be below the six-month moving average of 1.577 million for the third month in a row. Still, September’s housing starts remained above the long-run equilibrium of 1.5 million units as the demographic tailwinds continue to contribute to robust demand that will remain strong past the current short-term supply shock. On the state level, housing starts bounced back in the West and Midwest regions, rising by 17.8% and 7%, respectively, on the month after posting significant drops in the previous month. The South recorded the biggest drop in housing starts, down by 6.6% on the month, likely because of the residual impact of Hurricane Ida in early September. New permits—a proxy for future construction—saw an even more significant drop in September, down by 7.7% to 1.589 million from the downwardly revised 1.721 million in the prior month. Permits for both single-family and multifamily units declined on the month, down by 0.9% and 18.3%, respectively. Also in the report, the number of houses under construction rose by 1.3% in September, while the number for completions was down by 4.6% compared to the prior month.

The takeaway

As demand for housing has remained solid in recent months, high materials costs, supply-chain disruptions and labor shortages have hampered builders’ ability to fill demand. Although it will take some time for data on starts and permits to affect the final supply and demand of houses, the data suggests that the housing market will remain strong in the coming months.