Implications: Housing starts fell 11% in October, giving back more than all of the gain in September and then some. However, we continue to expect robust gains in home building in the year ahead and can think of at least four reasons not to worry. First, volatility in overall starts is typical and was driven by even more volatile multi-family starts, which fell 25.1% in October, after jumping 18.1% in September. Second, starts plummeted in the South as big storms and floods likely disrupted builders' plans to break ground. Third, building permits rose in October, while permits to build single-family homes hit their highest level since 2007. And fourth, the total number of homes under construction (started but not yet finished) increased 0.9% in October and is up 16.4% versus a year ago. The number of single-family homes under construction are up 14% in the past year and are at the highest level since 2008. The number of multi-family units under construction stands at the highest since the mid-1980s. Add it all up, and it's clear that builders were very busy in October, even though ground breaking took a breather. Based on population growth and "scrappage," we expect overall housing starts should rise to about 1.5 million units per year by 2017, so a great deal of the recovery in home building is still ahead of us. Expect the housing sector to remain one of the bright spots in the Plow Horse Economy.
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