US housing starts and permits not as weak as they look, economists say

According to the Department of Commerce, in seasonally adjusted terms, the annual rate of new home starts in the US dropped at a month-on-month pace of 1.6% in September to reach 1.56m.

That was well beneath the 1.61m pace anticipated by economists.

However, starts for single family homes were in fact steady at a clip of about 1.08m.

Versus a year ago on the other hand, the pace of total housing starts was 7.4% higher.

The number of new permits issued also undershot the consensus, dropping by 7.7% to reach an annual pace of 1.589m (consensus: 1.67m).

Yet here too, weakness was driven by the multi-family segment.

"Stepping back from the noise, the trends in single-family permits and starts are running above the pace implied by the new home sales numbers, likely because inventory is still low and homebuilders want to capitalize on rising prices," said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

"Eventually, construction activity will moderate relative to new home sales, but probably not for a few months, and in the meantime new sales are likely to pick up, given rising mortgage applications since mid-year."