U.S. housing starts remain near the 1.2 million post-recession peak

Housing starts increased by 74 thousand to 1,206 thousand (annualized) in September, handsomely beating expectations for an uptick to 1,142 thousand. Revisions to recent months' figures largely offset each other, with August revised higher at the expense of July starts.

Building permits declined by 58 thousand to 1,103 thousand during the month, missing expectations for an unchanged reading.

The uptick in starts was nearly all related to multifamily construction, with the number of units started rising by 72 thousand to 466 thousand (annualized). Single family starts, on the other hand, were little changed, rising by only 2 thousand to 740 thousand annualized.

Starts increased in all regions except the Midwest (-19k), with gains most pronounced in the West (+63k) and Northeast (+26k). Starts were a little higher in the South (+4k) with multifamily homebuilding rising to a near decade-high.

This morning's report is a healthy one, and suggests continuing improvement in the U.S. housing market. Housing starts are holding near the 1.2 million annualized mark, breaching this threshold for the second time since the recession began, and remaining only 5 thousand shy of their June peak. Better yet, the September figures appear more robust than those from three months prior, in light of the more pronounced strength in the single family segment - a measure that's less volatile and bodes well for ongoing medium-term strength.

On that note, while building permits - the best predictor of near-term starts - have pulled back to a six-month low, the decline is entirely due to the multifamily segment, which had in previous months experienced a surge of permitting due to regulatory changes in New York state. On the other hand, permits for single family homes remain only 2 thousand shy of their post-recession peaks.

"All in all, the new property housing market continues to be on the mend, buoyed by an improving labor market and historically low interest rates. Unemployment claims have recently hit another cyclical low as firms increasingly hold on to staff in anticipation of improving domestic demand. At the same time, mortgage rates have averaged below 4% for the twelfth week straight, providing impetus to new home sales, which surged to their best showing of the post-recessionary period in August. With the Fed increasingly likely to take a pass on a 2015 rate hike, borrowing costs look to remain highly supportive for the housing market, with residential investment likely to provide a welcome boost to economic activity over the coming quarters", notes TD Economics.