Housing Starts Increased 1.9% in October
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Implications:  Housing starts rose slightly in October, as homebuilders continue to wrestle with all kinds of headwinds, crosswinds, and tailwinds.  Looking at the big picture, during COVID, a combination of extremely low interest rates and pressure to work from home led to a big migration to the suburbs (and beyond) and high demand for single-family homes.  Then the economy reopened, causing many people to flock back to cities, sparking a boom in apartment projects.  Currently, the number of multi-unit properties under construction is hovering near record levels, going back to 1970, when records began. Now it looks like the move back to the cities has petered out leaving a glut of apartments.  Meanwhile, owners of existing homes are hesitant to list their properties and give up fixed sub-3% mortgage rates, so many prospective buyers have turned to new builds as their best option.  This has created a huge gap in the data, with construction of single-family homes up 13.1% in the past year while multi-unit starts are down 30.0%.  In other words, home building isn’t falling off a cliff and this isn’t a repeat of the prior housing bust.  Looking at the details of today’s report, both single-family and multi-unit starts contributed to the headline gain in October, although starts were revised down modestly in prior months.  Housing permits rose 1.1% in October, beating the consensus expectation, driven both by single-family and multi-units.  Notably, single-family permits have risen every month since early this year, signaling that developers are finally finding their footing in what has been a challenging year of sales.   While we don’t see housing as a driver of economic growth in the near term, recent numbers are certainly not what you’d expect to see if there was a severe housing bust like the 2000s on the way, either.

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Posted on Friday, November 17, 2023 @ 12:05 PM

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.