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Macro Flash Report

Housing Market

Takeaway:

Today’s housing starts and building permits data came in below expectations as weather and increasing mortgage rates proved to be a headwind in October. Looking forward, home builders’ sentiment in November reached a 7-month high.

Housing Starts & Building Permits

In October, Housing Starts declined by -3.1% month-over-month to an annualized rate of 1,311k units, down from the revised lower 1,353k in September and missing the market expected 1,340k. The hurricanes in the South did disrupt construction activity, however this marked the third consecutive month of declines, reflecting broader challenges still facing the sector. Mortgage rates nearing 7% again and a growing inventory of new homes are weighing on momentum.

  • The downturn was mainly driven by a drop in single-family projects (-6.9% to 970k), while multi-family units saw an increase (+9.8% to 326k).

Building Permits, a forward-looking indicator of construction activity, fell by -0.6% in October to an annual rate of 1,416k, below the forecasted 1,440k and down from September’s 1,425k units. This also marks the third consecutive month of declines.

  • Authorizations for multifamily units led the drop (-3% to 393k), which offset the modest gain in single-family approvals (+0.5% to 986k).

The NAHB Housing Market Index, a gauge for single-family homebuilder sentiment, increased to 46 in November, up from 43 in October and surpassing the market expected 44. This improvement, the highest level in seven months, was fueled by builders’ optimism that post-election conditions will bring significant regulatory relief, paving the way for increased construction of homes and apartments.

  • All three indices were up: current sales conditions (+2 to 49), sales expectations in the next six months (+7 to 64), and traffic of prospective buyers (+3 to 32).