Despite a small bounce in homebuilder sentiment (and a tumble in mortgage rates), analysts expected housing starts and building permits to decline MoM in November (after unexpectedly rising last month).
But the picture was very different – Housing Starts exploded 14.8% MoM (-0.2% exp) with only a small downward adjustment in October (from +1.9% MoM to +0.2% MoM). That is the third monthly gain in a row.
Building Permits fell slightly more than expected (-2.5% MoM vs -2.2% MoM exp) and an upward revision in Octobe from +1.1% to +1.8% MoM.
Source: Bloomberg
On a SAAR basis, Housing Starts are near their highest since May 2022, while building permits are at their lowest since July…
Source: Bloomberg
Under the hood, the surge was all in single-family starts which soared 18% MoM. Single-family permits rose MoM for the 11th month in a row…
Source: Bloomberg
2023 has been the year to end ‘Renter Nation’ as single-family starts have soared while multi-family unit starts have tumbled…
Source: Bloomberg
And Multi-family Permits plunged to three year lows… Assuring the current rental easing is temporary and by the time OER catches up to market today (12 month lag), rents will be much higher
Source: Bloomberg
Mortgage rates are down 100bps from their highs at the end of October, but it seems while homebuilders are starting homes at a furious pace (despite sentiment being low still)…
Source: Bloomberg
…the more forward-looking permits refuse to buy what The Fed is selling…
Source: Bloomberg
But, despite the drop in mortgage rates, there is still a massive gap between current and effective rates held by Americans…
Source: Bloomberg
Oddly, despite the regime shift lower in housing starts and completions, construction jobs (according to the BLS) are hitting new cycle highs…
Source: Bloomberg
More supply is good – no doubt – but we can’t help but feel like Powell’s latest pivot will simply create the next mega-bubble in single-family real estate… again! And worse still, send the ‘shelter’ aspect of CPI soaring once again.
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