Implications:  November was another tough month for homebuilders, as housing starts missed consensus expectations and declined 1.8%, falling to a four-month low.  However, the details for November were not quite as bad as the headline.  The decline in starts in November was entirely due to a 23.2% drop in the volatile multi-family category, which more than offset a 6.4% rebound in single-family construction as hurricane weather delayed activity in the South and Northeast regions the previous month. Another silver lining is that permits for new builds jumped 6.1% in November to a nine-month high, although that was driven by a 19.0% jump in the multi-family category.  Still, building permits and housing starts appear to be stuck in low-gear, down 0.2% and 14.6%, respectively, from a year ago, and sit at roughly the same levels as 2019.  The same cannot be said for completions.  Despite a third straight monthly decline, completions are up 9.2% in the past year and were at a faster pace in November than any month from 2021-2023.  With strong completion activity and tepid growth in starts, the total number of homes under construction continues to fall, now down 14.6% since the start of 2024.  That type of decline is usually associated with a housing bust or recession.  The home building sector seems strangely slow given our population growth and the ongoing need to scrap older homes due to disasters or for knockdowns. We think government rules and regulations are likely the major hurdle for builders in much of the country, but home construction might also be facing headwinds from a low unemployment rate (which makes it hard to find workers) as well as relatively high mortgage rates.  Notably, while mortgage rates were trending lower leading up to the first rate cut announcement from the Federal Reserve in September, these rates are up roughly 50bps since then. That said, there are some tailwinds for housing construction, as well.  Many owners of existing homes are hesitant to sell and give up their fixed sub-3% mortgage rates, so prospective buyers will often need new builds.  In addition, Millennials are now the largest living generation in the US and have begun to enter the housing market in force, which represents a demographic tailwind for activity.  Putting it together, we don’t see housing as a major driver of economic growth in the near term, but we’re not expecting a housing bust like the 2000s on the way, either.  In other recent housing news, the NAHB Housing Index (a measure of homebuilder sentiment) remained at 46 in December.  A reading below 50 signals a greater number of builders view conditions as poor versus good.

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