Drop in home construction is biggest in 6 months
Construction of new homes fell 4.7 percent in September, the biggest decline in six months, reflecting weakness in both single-family activity and apartment building.
The September result left construction at a seasonally adjusted annual rate of 1.13 million units, the Commerce Department reported Wednesday. It was the sharpest decline since a 7.7 percent fall in March.
Homebuilding has been sliding this year, but economists remain optimistic that the low level of unemployment were impacted by the storm, shutting down an average of four days and seeing reduced sales for about 10 days, the report said. Services firms that reported disruptions said they lasted one to two weeks on average.
But in the weeks since the storm, as one might expect, recovery efforts have boosted sales at building supplies stores and other retailers. Auto sales surged in Houston, according to the report, with will soon spark a rebound in sales and construction. Even though construction activity has fallen in recent months, home building is 6.1 percent higher than a year ago.
Single-family building contracted 4.6 percent in September, while apartment construction was down 5.1 percent.
Construction activity in August declined a revised 0.2 percent, a slightly smaller drop than initially reported. Damage from Hurricanes Harvey and Irma did not have a major impact on the August figures.
Applications for new building permits, a sign of future one dealer noting “incredibly strong sales” and estimating that hundreds of thousands of cars were flooded.
The resilience and continued expansion of regional economy helped sustain hiring and wage increases over the past six weeks, the report said. Contacts across a wide range of industries noted labor shortages, impeding the growth of factories and driving up overtime costs for service-providing firms.
More than a quarter of companies surveyed by the Dallas Fed said they expect more difficulty finding workers activity, dropped 4.5 percent in September to an annual rate of 1.22 million units.
Even with the decline in construction and permits, analysts found reasons for optimism. Ian Shepherdson, chief economist at Pantheon Macroeconomics, noted that permits for single-family construction rose 2.4 percent even though the overall permit number was held back by a 16.1 percent plunge for apartment building.
“We’re expecting new home sales to strengthen markedly,” he said in a research note, spurred by potential buyers rushing to close deals before mortgage rates move higher. because of the hurricane, and construction firms said they were bracing for shortages as workers flock to rebuilding jobs in Houston and along the Gulf Coast.
In Houston, single-family homes suffered the most damage, the report said.
Despite some shutdowns along the Gulf Coast and trouble finding qualified workers, the “robust” expansion of regional factory production continued, led by computer and electronic product manufacturing and other durable goods. Output of nondurable goods slowed during the six
A survey released Tuesday showed that homebuilders are feeling more optimistic than they have in months about the future. The National Association of Home Builders/Wells Fargo builder sentiment index rose 4 points to 68 in October, the highest reading since May. Readings above 50 indicate more builders see conditions as good rather than poor.
A shortage of homes for sale combined with rising prices translated into an affordability challenge.
Construction fell most in the Midwest, a 20.2 percent drop. It was down 9.3 percent in the South and 9.2 percent in the Northeast. weeks, mostly due to hurricane-related issues that the report called “transitory.”
Refineries were ramping back up quickly and reported little damage to infrastructure, and drilling in the Eagle Ford and offshore had returned to normal operations, according to the report. While contacts said they still expected drilling activity to decline by the end of the year, outlooks into 2018 were positive.
Across the service sector, about a third of firms surveyed by the Dallas Fed said they expected a net negative impact from the storm. Half of respondents expected no impact.
Staffing firms noted increased demand for accountants, data entry specialists, call centers and adjusters in the storm’s aftermath, but generally expected things to return to normal by the end of the year.
Overall, home sales weakened during the past six weeks, but Austin and Dallas-Fort Worth saw strong demand for low- and midpriced homes. The volume of residential real estate loans abated since the last report.
Farmers and ranchers reported losses in areas affected by Harvey. While the extent of damage wasn’t fully known, the report said, some livestock was lost and a small portion of the Texas cotton, rice and soybean crops were damaged.
But more broadly, the report said, “agricultural producers remain concerned about low crop prices, NAFTA negotiations and the configuration of the next farm bill.”