Multi-Family Housing Starts Slide Most in October

According to the U.S. Census Bureau and HUD, U.S. housing starts in October dropped by a precipitous 11.7 percent compared with September. The October annualized rate was 519,000 units, down from the revised September figure of 588,000 units.

November 18, 2010
By Dees Stribling, Contributing Editor

Courtesy Flickr Creative Commons user yeowatzup

According to the U.S. Census Bureau and HUD, U.S. housing starts in October dropped by a precipitous 11.7 percent compared with September. The October annualized rate was 519,000 units, down from the revised September figure of 588,000 units.

Most of the decline was attributable to the ever-volatile multi-family housing sector (five or more units), which saw a cratering of starts–even though demand for apartments has been up lately–from an annualized rate of 141,000 units in September to 74,000 units in October, or a 47.5 percent month-over-month drop. The drop in single-family home starts month-over-month, on the other hand, was only 1.1 percent, a decline from 441,000 units to 436,000 units, roughly where the rate was in August.

Housing permits, a more forward-looking indicator, were slightly up in October. Single-family permits rose 1 percent, while multifamily permits were up 0.8 percent.

Fed Orders More Stress Tests

The Federal Reserve, perhaps mindful of the foreclosure mess and its possible impact on the nation’s largest banks–though the central bank says that isn’t a main motivator–has ordered a second round of “stress tests” for the top 19 U.S. banks. In Fed-speak, the stress tests will be done according to “a revised temporary addendum to Supervision and Regulation letter 09-4, ‘Dividend Increases and Other Capital Distributions for the 19 Supervisory Capital Assessment Program Firms.’ ”

The last time stress tests were done was during the trough of the Great Recession. The new tests will put “particular emphasis,” according to the Fed, on a bank’s ability to absorb losses over the next two years under an “adverse macroeconomic scenario specified by the Federal Reserve and adverse scenarios appropriate for a particular firm’s business model” ; how a bank will handle the upped capital requirements of Basel III and the Wall Street Reform Act; and a bank’s plans to pay U.S. government bailout money.

On Wednesday, Fed Governor Elizabeth A. Duke told the lame-duck U.S. House Financial Services Subcommittee on Housing and Community Opportunity that “financial institutions face a number of risks if inadequate controls result in faulty foreclosure documents or failure to follow legal procedures… Cost associated with foreclosure documentation problems, including ‘robo-signing’ are not the only potential liabilities facing financial institutions. Investors in mortgage-backed securities and purchasers of unsecuritized ‘whole loans’ have begun to explore and in some cases assert contractual and securities law claims against the parties that originated the loans, sold the loans, underwrote securities offerings, or had other roles in the process.”

Buffet Thanks Uncle Sam

In a “thank-you note” to Uncle Sam on Wednesday on the op-ed page of the New York Times, billionaire investor Warren Buffet wrote, regarding the Panic of 2008, that “virtually overnight, everything began to turn into pumpkins and mice. There was no hiding place. A destructive economic force unlike any seen for generations had been unleashed.

“The challenge was huge, and many people thought you were not up to it. Well, Uncle Sam, you delivered. People will second-guess your specific decisions; you can always count on that. But just as there is a fog of war, there is a fog of panic—and, overall, your actions were remarkably effective.”

Wall Street had a mixed time of it on Wednesday, without much net movement by the end of the day. The Dow Jones Industrial Average lost 15.62 points, or 0.14 percent, while the S&P 500 gained a minuscule 0.02 percent and the Nasdaq advanced 0.25 percent.