Have you heard enough bad news about the U.S. homebuilding market? Then you’ve come to the right place. It’s true that January to September starts this year were -43.7% versus January to September of last year nationwide. But look at what’s been happening over a shorter timeframe.

Q3 vs Q2 regionally

Total U.S. housing starts in the latest quarter of this year (Q3) were +9.3% compared with the previous quarter (Q2). In the Northeast they were +7.9% in the third quarter versus the second quarter; in the Midwest they were +21.5%, and in the South +11.2%. Only in the West was there a further decline: -2.9%. Total single-family starts in the latest quarter versus the previous quarter were +16.8% while multiples were -18.6%. The South still accounts for 50% of all starts.

While a further round of mortgage foreclosures is to be expected, given the expiry of several government rescue packages, it seems unlikely that starts will dip significantly from this point moving forward. That is not to say that no further decline from month to month is a guarantee. Even in the latest month, residential building permits were off slightly from the month before.

Offshoot and partner in recovery

However, based on rising industrial production numbers, super low interest rates, stabilization in home prices and gains that are underway in consumer and business confidence, the evidence seems clear that the economy is picking itself up off the floor. A very gradual improvement in housing starts should be both an offshoot and a partner in the recovery that is underway.

As a final word, completions in September (-10.2%) were well down from August. This indicates that a further appropriate adjustment in supply is underway. The government release on new home sales is scheduled for Oct. 28. As per usual, the latest figure on number-of-months of unsold inventory is eagerly awaited. In August, it was 7.2 versus a high of 12.4 in the first month of this year. The sooner the figure adjusts downward to its long-term equilibrium level of 4.5 months, the better for all participants and stakeholders in the industry.