US housing starts surge 25% in September

US housing starts rose more than expected in October, according to data from the Commerce Department.

Housing starts surged 25.5% from the revised September figure to a seasonally-adjusted rate of 1.32m. This marked a nine-year high and comfortably surpassed expectations for an increase to 1.15m. September’s rate was revised to 1.054m from 1.047m.

Single-family housing starts in October were up 10.7% to 869,000, while permits for new construction – a closely-followed gauge of future demand – gained 0.3% from the previous month to 1.23m.

Permits for single-family homes were up 2.7% to a rate of 762,000.

Pantheon Macroeconomics said: “We thought starts would mean-revert after their unexpected September drop, but instead they have rebounded far above the pace implied by the permits numbers, which are much less influenced by the weather. October was unusually warm, which supports starts but doesn't much affect permits.

“The jump in starts was concentrated in the hyper-volatile multi-family sector, up 69%, but single-family starts jumped too, up 10.7% after an 8.4% increase in September (all the September drop was multi-family). As a result, both single and multi-family starts now stand well above the pace implied by permits, and a correction over the next couple of months is inevitable. The trend in single-family permits has nudged higher in the past couple of months, but we doubt it will be sustained given the rollover in applications for new mortgages to finance house purchase. Higher mortgage rates already are deterring would-be homebuyers, with more to come.”