Housing starts rose 1.9 percent in September to 1.415 million at a seasonally-adjusted annualized rate. Single-family starts jumped 8.5 percent in September to 1.108 million, while multifamily starts, which are more volatile, fell 16.3 percent.
New residential construction permits rose 5.2 percent in September to 1.533 million; this is the highest level of permits since early 2007, when the housing boom was turning into the housing bust. Single-family permits rose almost 8 percent over the month, to 1.119 million, also the highest level since early 2007, while multifamily permits fell 1 percent.
Homebuilding is leading the nascent recovery from the Viral Recession earlier this year. Starts and permits plummeted in the late winter and early spring as construction sites shuttered because of the pandemic, but have since rebounded sharply as construction activity has resumed. Permits, which are a leading indicator of homebuilding, are above their early 2020 highs and in fact are at their highest levels in more than a decade, with single-family permits showing particular strength. Starts are not quite as high as they were in February, but rising permits point to further gains in residential construction through the rest of this year. There are no indications yet of the oversupply in the housing market that helped cause the Great Recession in 2007 and 2008; given years of weak homebuilding, it will take some time for supply to catch up with demand.
The recovery in the labor market and record-low mortgage rates are driving the rebound in homebuilding. It could also be that a shift in the housing market is underway, with households shifting toward single-family homes in the suburbs because of the pandemic. With the 30-year fixed mortgage rate remaining below 3 percent and strong job gains continuing in the near term, housing starts will rise through the rest of 2020 and into 2021, supporting the overall economic recovery. A downside risk is an inability of Congress and the Trump administration to provide further fiscal stimulus, which could drag on job growth and the housing market recovery.
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