Instant View: Housing starts surge to fastest pace since 2008
NEW YORK (Reuters) - Groundbreaking on new U.S. homes surged in September to its fastest pace in more than four years, a sign the housing sector's budding recovery is gaining traction.
The Commerce Department said on Wednesday housing starts increased 15 percent last month to a seasonally adjusted annual rate of 872,000 units. That was the quickest pace since July 2008, though data on housing starts is volatile and subject to substantial revisions.
August's starts were revised to show a 758,000-unit pace instead of the previously reported 750,000.
Economists polled by Reuters had forecast residential construction rising to a 770,000-unit rate.
Building permits grew by 11.6 percent to a 894,000-unit pace in September. August's permits were unrevised at 801,000 units.
Economists had expected permits to rise to a 810,000-unit pace last month.
MICHAEL MORAN, CHIEF ECONOMIST, DAIWA SECURITIES AMERICA, NEW YORK:
"The rise in housing starts was striking and included an impressive rise in single-family starts.
"Activity was even stronger than what we had when the tax credit was in place in 2010.
"It seems as though low interest rates and stable prices are starting to stir the interest of potential buyers.
"Housing is improving, but we are still at desperately low levels compared to pre-recession norms. I suspect that many potential buyers have a different attitude toward housing now than in years past. In past years, housing was viewed as an essential part of a typical family's portfolio and now, because of the price adjustment we experienced over the past few years, the investment value of housing has been called into question."
MICHAEL HANSON, SENIOR ECONOMIST, BANK OF AMERICA MERRILL LYNCH, NEW YORK:
"It's much stronger than consensus. We had a big boost in single-family and multi-family construction. This is pretty clear evidence that there is really momentum in the housing market. There is a big jump in permits as well. The fear of further downside which had kept both buyers and sellers on the sidelines might have bottomed. There are more people transacting. There might be some pent-up demand.
But October could show a pull back because we had such a big pop in September. Also there could be headwinds like Europe which could derail this recovery.
With the Fed buying mortgage-backed securities, they are trying to keep mortgage rates very low. That would spur refinancing and put more money into homeowners' pocket."
JOHN CANALLY, ECONOMIST, LPL FINANCIAL, BOSTON:
"What it tells me is the housing market momentum we've been seeing here for the last nine months or so continued in September. I don't think it's quite as strong as we saw it, but the future indicators given permits look pretty decent.
"Things are lining up for housing and housing is likely to contribute to GDP growth this year for the first time in many years. It's another step in the right direction, but you still have a long, long way to get back to 'normal' in housing."
GARY THAYER, CHIEF MACRO STRATEGIST, WELLS FARGO ADVISORS, ST. LOUIS, MISSOURI:
"Multi- and single-family housing starts both showed a good gain. The increased optimism we have been seeing among builders is translating into actual construction.
"One of the big headwinds for the economy has been weak housing market and this indicates that headwind has dissipated. The economy could benefit from stronger housing next year and that sector will be more of a tailwind than a headwind.
"By keeping mortgage rates low, the Fed has helped create an environment favorable for potential buyers. The combination of lower prices and low interest rates is helping."
JOSEPH TREVISANI, CHIEF MARKET STRATEGIST, WORLDWIDE MARKETS, WOODCLIFF LAKE, NEW JERSEY:
"Housing starts and building permits were stronger in September but the sector has been marking time for the past six months at half its historic annual rates. When growth and employment return to the economy construction will pick up rapidly."
JOHN BRADY, MANAGING DIRECTOR AT R.J. O'BRIEN & ASSOCIATES IN CHICAGO:
"Much stronger than expected, a very impressive number. Should be good for risk assets, but the focus is on last night's presidential debate."
(Americas Economics and Markets Desk)