Housing has been one of the weaker areas of the economy this cycle but recent reports are encouraging. For example, privately-owned housing starts in October rose by 3.8 percent to 1.314 million units, according to the Census Bureau. That was in line with estimates and the September gain was revised higher. Multi-family (rental) starts rebounded by 6.8 percent in October, and single-family starts increased by 2.0 percent to the best reading since the start of the year. As for building permits, this measure of future activity also improved last month, with strength seen across all regions of the country and the single-family gauge climbing to a 12-year high.
Looking ahead, homebuilder optimism remained elevated in November, and NAHB chairman Greg Ugalde added that “in a further sign of solid demand, this is the fourth consecutive month where at least half of all builders surveyed have reported positive buyer traffic conditions.” The uptick in construction in America is another sign of the delayed stimulative effects of the Federal Reserve’s recent monetary policy easing (rate cuts). This bodes well for residential fixed investment in Q4, and in turn U.S. gross domestic product growth. Increased building also means greater supply, which will help further remove some of the upward pressure on home prices, arguably the biggest sales obstacle of the past few years. Perhaps most importantly, the housing market still has several hurdles to overcome but the latest resurgence is encouraging because it is the exact opposite of what typically occurs ahead of a recession.
Sources: Econoday, U.S. DoC, NAHB, Twitter, FRBSL