New home construction increases slightly in September; Still greatly outpaces sales

New construction dn-3

The U.S. Census Bureau and US Department of Housing and Urban Development (HUD) issued a their report on New Residential Construction for September 2010 showing a slight increase in single-family home building permits and an increase in new home starts compared to the month before.

The report shows the following:

  • Building permits issued for single-family residences in September were at an annual rate of 405,000 which is 0.5 percent  above the revised August rate of 403,000 and a decrease of 14.4 percent from a year ago when the rate was 473,000.
  • Housing starts for single-family residences in September were at an annual rate of 452,000 which is an increase of 4.4 percent from the revised rate for August of 433,000 and an decrease of 10.8 percent from a year ago.
  • Homes completed in September were at a rate of 501,000 homes, an increase of 4.8 percent from August’s revised rate of 478,000 homes and an increase of 4.4 percent from a year ago.

As I say every month, we need to remember that all the numbers above are “seasonally adjusted” annual rates and the year over year comparisons are just comparing the numbers for September 2010 versus September 2009. Another way I like to look at where things stand is to simply look at the year to date data; actual numbers, not seasonally adjusted, compared to last years ytd numbers at this same time. I think this may give a little better comparison so those numbers are below:

  • Through September 2010 there have been 354,700 permits issued for new homes compared with 331,500 this time last year for an increase of 7.0 percent.
    • In September there were 34,800 permits issued, a decrease of 6.5 percent from August.
  • Through September 2010 there have been 376,200 new homes started compared with 340,400 this time last year for an increase of 10.52 percent.
    • In September there were 40,000 new homes started, an increase of 2.8 percent from August.
  • There have been 370,300 new homes completed through September 2010, a decrease of 0.7 percent from the year before.
    • In September there were 45,400 new homes completed, an increase of 10.2 percent from August.

Let’s do one of my favorite things and look at the raw numbers and not seasonally-adjusted numbers to compare construction activity to sales:

  • Through the end of August, 2010 (the most recent period sales data is available for) there have been 234,000 new homes sold and there have been 324,900 new homes completed, outpacing sales by 38.9 percent.
    • For the 12-month period September 2009 through August 2010 there were 347000 new homes sold and there were 515,900 new homes completed, outpacing sales by 48.7 percent.
  • Through the end of August there have been 336,200 new homes started outpacing the new ytd home sales activity through August by 43.6 percent.

The headlines thus far today seem very “positive” on this news…there are MORE new homes being built….While construction continues to greatly out pace Sales, I just don’t get it…Granted, I don’t have a PhD. (although I feel like I’ve earned one the hard way), but to me it seems to be pretty fundamental….when supply, or production, outpaces demand, that is not good for the market – good for the buyer, but not the market.


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