Housing Starts Report Only Decent

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Hours before the housing starts report on my twitter account.

https://twitter.com/LoganMohtashami

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Today’s Census report showed a big rebound from last month’s soft housing starts data.  The report shows that there were 1,290,000  housing starts in October 2017. This number is higher than the previous revised print of 1,135,000 starts but the year over year number is negative as October of 2016 came in at 1,328,000 starts. Context is key when looking at housing data. Since the last report on housing starts was very weak it allowed a more favorable comparison to today’s report on a month to month basis.  We did see a pick up in the South which gave us the Hurricane bounce we were anticipating. The hurricane was the big factor in the weak report last month. However, once you view the data in context, we can see that housing is still adhering to the same slow and steady trend higher.

From Census:
https://www.census.gov/construction/nrc/index.html?CID=CBSM+EI

Housing Starts:
Privately-owned housing starts in October were at a seasonally adjusted annual rate of 1,290,000. This is
13.7 percent (±10.5 percent) above the revised September estimate of 1,135,000, but is 2.9 percent (±10.1
percent)* below the October 2016 rate of 1,328,000. Single-family housing starts in October were at a rate
of 877,000; this is 5.3 percent (±12.1 percent)* above the revised September figure of 833,000. The October
rate for units in buildings with five units or more was 393,000.

Building Permits:
Privately-owned housing units authorized by building permits in October were at a seasonally adjusted
annual rate of 1,297,000. This is 5.9 percent (±1.4 percent) above the revised September rate of 1,225,000
and is 0.9 percent (±1.6 percent)* above the October 2016 rate of 1,285,000. Single-family authorizations
in October were at a rate of 839,000; this is 1.9 percent (±1.7 percent) above the revised September figure of
823,000. Authorizations of units in buildings with five units or more were at a rate of 416,000 in October

As long as theme of slow and steady continues we should be fine for housing for years to come but this wasn’t the best report to tout.  We saw a big move in multifamily starts (37% month to month) which is notoriously violent sometimes.

From Calculated Risk:
http://www.calculatedriskblog.com/2017/11/housing-starts-increased-to-1290.html
StartsShortOct2017 (1)
Note that single family housing starts growth is up 10.2% year to date, which is the main positive aspect for 2017. The multifamily boom in terms of rate of growth has peaked as supply has caught up with demand. This is why it is very crucial to see single family growth on housing starts now more than ever. Below we can see the rent inflation data from BLS and it is cooling off. This is also why I don’t believe CPI core inflation will really take off anytime soon.

From BLS:
https://www.bls.gov/charts/consumer-price-index/consumer-price-index-by-category.htm#

Nov rent inflation

Because housing starts and new home sales are still very low considering our long economic expansion cycle, with rates below 5% since early 2011 and over 154,000,000 people working today, we still have ample room to grow in this sector.

From Doug Short:
https://www.advisorperspectives.com/dshort/updates/2017/11/17/new-residential-housing-starts-up-13-in-october

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Slow and steady is still the theme for housing for the next few years.

Logan Mohtashami is a financial writer and blogger covering the U.S. economy with a specialization in the housing marketLogan Mohtashami is a senior loan officer at AMC Lending Group,  which has been providing mortgage services for California residents since 1987. Logan also tracks all economic data  daily on his own facebook page https://www.facebook.com/Logan.Mohtashami