Implications:  Housing starts surprised to the upside in November, but the details of the report leave something to be desired.  While new construction across all units rose 3.2% in November, single-family starts fell 4.6% for the month. In other words, the gain in November came entirely from the volatile multi-family sector, where starts jumped 22.4%.  Some pessimistic analysts will surely dwell on the fact that housing starts are down 3.6% in the past year.  But what they may not mention is that this is largely due to impacts from last year's unusually strong hurricane season. The fourth quarter of 2017 saw a storm-induced jump in new construction in the aftermath of Hurricanes Harvey and Irma.  With that in mind, year-ago comparisons involving a single month look like a poor measure of housing health.  Instead, we prefer to focus on the trend by comparing the first eleven months of this year to the same eleven months in 2017.  In contrast to the single-month comparisons, that year-to-date measure shows single-family starts up 3.2% while overall starts are up 4.7%.  And it's nearly certain that next month's report will show positive growth for 2018 as a whole, demonstrating that the broader trend in construction growth remains intact.  The forward-looking data in today's report shows permits for new construction rose 5.0% in November, the biggest single month increase in over a year.  However, once again, this gain was also almost entirely due to multi-family starts.  Using our trend measure, permits are up 2.3% in the first eleven months of 2018 compared to the same period last year.  Despite recent softness, our outlook on housing hasn't changed.  We still anticipate a rising trend in home building in the next few years.  Based on fundamentals – population growth and scrappage – the US needs about 1.5 million new housing units per year but hasn't built at that pace since 2006.  The problem is that there continue to be some headwinds that may temper near-term growth in home building.  For example, the increasingly tight labor market has made hiring difficult across industries, and construction is no exception, with job openings in that sector near a record high. On the bright side, prices for residential construction inputs (which rose due to tariff concerns) have started to decline, which should take some pressure off builders.  On net, there remain some difficulties within the housing sector, but they are little more than a hiccup on the continued march higher.  In other recent housing news, the NAHB index, which measures homebuilder sentiment, fell unexpectedly to 56 in December from 60 in November, remaining at a historically elevated level but hitting its lowest reading since 2015.  Homebuilders primarily cited rising interest rates causing affordability concerns for buyers as the reason for their declining optimism.  Mortgage rates peaked in early November, but have now turned lower, which should help boost sentiment as we close out the year.  On the manufacturing front, the Empire State Index, which measures factory sentiment in the New York region, fell sharply to 10.9 in December from 23.3 in November.  Despite the drop, the index remains in expansionary territory, and the forward-looking components continue to show optimism heading into next year, most notably in planned capital expenditures.   

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