Strong Housing Starts Estimate Matches Rise in Builder Confidence

Total housing starts increased in November, with strong readings from the single-family sector. Total starts increased 3.3% to a 1.3 million seasonally adjusted annual rate, according to the joint data release from the Census Bureau and HUD. The headline number was supported by strong numbers from single-family home building.

Single-family starts increased for the month, rising 5.3% to a 930,000 seasonally adjusted rate in November. This is the highest monthly annual rate since the Great Recession. Single-family starts are up almost 9% year-to-date compared to 2016 as limited existing inventory and solid builder confidence make for positive market conditions.

The solid November estimate matches the increase in the NAHB/Wells Fargo Housing Market Index to a level of 74 in December. Single-family permits, a reasonable indicator of future construction conditions, are running 10% higher on a year-to-date basis.

Multifamily starts were effectively flat in November, registering a 367,000 annual rate. On a three-month moving average basis, multifamily construction reached the highest annualized pace (356,000) since April. Multifamily starts were downwardly revised in October from 413,000 to a 373,000, which is more consistent with our forecast of the apartment sector leveling off.

With respect to housing’s economic impact, 55% of homes under construction in November were multifamily (611,000). As shown in the graph above, with recent production declines for apartments, the current count of multifamily units is just slightly higher than a year ago (2%). There were 499,000 single-family units under construction, a gain of almost 12% from this time in 2016.

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