The Slow & Steady Housing Start Story Continues

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Today the Census Bureau report told a solid single family starts story, with privately owned housing unit starts coming in at 930,000.  This report continues the long, slow increase in single family starts to which we have grown accustomed on this economic cycle.

From Census:  
https://www.census.gov/construction/nrc/pdf/newresconst.pdf

Housing Starts:
Privately-owned housing starts in November were at a seasonally adjusted annual rate of 1,297,000. This is
3.3 percent (±9.1 percent)* above the revised October estimate of 1,256,000 and is 12.9 percent (±11.7
percent) above the November 2016 rate of 1,149,000. Single-family housing starts in November were at a
rate of 930,000; this is 5.3 percent (±10.2 percent)* above the revised October figure of 883,000. The
November rate for units in buildings with five units or more was 359,000.

Building Permits:
Privately-owned housing units authorized by building permits in November were at a seasonally adjusted
annual rate of 1,298,000. This is 1.4 percent (±1.7 percent)* below the revised October rate of 1,316,000,
but is 3.4 percent (±2.3 percent) above the November 2016 rate of 1,255,000. Single-family authorizations
in November were at a rate of 862,000; this is 1.4 percent (±1.6 percent)* above the revised October figure
of 850,000. Authorizations of units in buildings with five units or more were at a rate of 395,000 in November.

Even though revisions where negative in this report, single family start growth is overshadowing multifamily starts and that is the single most important story in the housing market today.  The reason why total housing start growth isn’t very strong this year is 100% related to slowdown we have seen in the multifamily sector which has cooled off since 2015.

From Calculated Risk:
http://www.calculatedriskblog.com/2017/12/housing-starts-increased-to-1297.html

http://www.calculatedriskblog.com/2017/12/comments-on-november-housing-starts.html

StartsShortNov2017 (1)
Starts20162017Nov

Since 2010, my prediction for new home sales and housing starts is that these metrics would show slow and steady growth .  Due to over-investment in housing in the last economic cycle and weak demographics for housing in this cycle along with the removal of exotic loans, expecting anything other than slow and steady growth seems foolhardy.

For example on twitter today I said this

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Which my answer was this.

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Simply put, we don’t have demand to warrant more building even with this long economic expansion, over 154,000,000 people working and mortgage rates under 5% since early 2011.  The housing starts and new home sales data look exactly as expected considering our demographics and the high price of new  homes compared to existing homes. Existing homes also have a larger supply  and the geographical advantage of being wide-spread.

All in all, this is a good report even with the negative revisions.  The main thing to remember is that housing starts and new home sales are still very low, which means we still have the legs to walk higher.

From Doug Short:
https://www.advisorperspectives.com/dshort/updates/2017/12/19/new-residential-housing-starts-up-3-3-in-november
STARFT DEC

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