Privately-owned housing starts in November grew at a seasonally adjusted annual rate of 1.256 million units, according to new data from the U.S. Census Bureau. That was a 3.2 percent increase from October’s upward-revised print and a larger rebound than anticipated. All of the strength, though, was due to multi-family units (rentals), which jumped by 24.9 percent in November, while single-family starts actually fell by 4.6 percent. Regionally, starts rose in the Northeast (37.8 percent) and the South (15.1 percent) last month and fell in the Midwest (-19.2 percent) and the West (-14.2 percent). As for building permits, this metric of future construction activity also improved in November, but again the bulk of the strength was concentrated in the rental arena.
Moreover, single-family building authorizations are down 1.9 percent on a year-over-year basis and starts have fallen by 13.1 percent. Although the latest weakness is more likely a healthy correction in the housing market than a complete collapse akin to 2006-2008, homebuilder optimism has turned sharply lower recently. For example, the NAHB’s headline sentiment index fell to 56 in December, the weakest reading since May 2015 and equal to the largest 2-month decline in 17 years. Under the hood, measures of current sales conditions, sales expectations six months from now, and prospective buyer traffic all deteriorated in December. NAHB chairman Randy Noel added that “We are hearing from builders that consumer demand exists, but that customers are hesitating to make a purchase because of rising home costs. However, recent declines in mortgage interest rates should help move the market forward in early 2019.”
Sources: Econoday, U.S. Census Bureau, NAHB, FRBSL
Post author: Charles Couch