Builders
started construction of privately-owned housing units
in October at a seasonally adjusted annual rate (SAAR) of 1,425,000 units (1.410
million expected). This
is 4.2% (±12.7%)* below the revised September estimate of 1,488,000 (originally
1.439 million units) and 8.8% (±12.7%)* below the October 2021 SAAR of
1,563,000 units; the not-seasonally adjusted YoY change (shown in the table
above) was -9.7%.
Single-family
housing starts in October were at a SAAR of 855,000; this is 6.1% (±13.4%)*
below the revised September figure of 911,000 units (-22.2% YoY). Multi-family:
570,000 units (-1.2% MoM; +17.4% YoY).
* 90% confidence interval (CI) is not statistically different from zero. The Census Bureau does not publish CIs for the entire multi-unit category.
Total
completions were at a SAAR of 1,339,000.
This is 6.4% (±10.6%)* below the revised September estimate of 1,431,000
(originally 1.427 million units), but 6.6% (±12.6%)* above the October 2021 SAAR
of 1,256,000 units; the NSA comparison: +5.1% YoY.
Single-family completions were at a SAAR of 961,000; this is 8.3% (±8.2%) below the revised September rate of 1,048,000 units (+0.4% YoY). Multi-family: 378,000 units (-1.3% MoM; +19.4% YoY).
Total
permits were at a SAAR of 1,526,000 units (1.516 million expected). This is 2.4%
below the revised September rate of 1,564,000 (originally 1.564 million units) and
10.1% below the October 2021 SAAR of 1,698,000 units; the NSA comparison:
-11.2% YoY.
Single-family permits were at a SAAR of 839,000; this is 3.6% below the revised September figure of 870,000 units (-24.0% YoY). Multi-family: 687,000 units (-1.0% MoM; +10.3% YoY).
Elevated
interest rates, stubbornly high building material costs and declining
affordability conditions that are pushing more buyers to the sidelines continue
to drag down builder sentiment.
Builder
confidence in the market for newly built single-family homes posted its 11th
straight monthly decline in November, dropping five points to 33, according to
the National Association of Home Builders (NAHB)/Wells Fargo Housing Market
Index (HMI) released today. This is the lowest confidence reading since June
2012, with the exception of the onset of the pandemic in the spring of 2020.
“Higher
interest rates have significantly weakened demand for new homes as buyer
traffic is becoming increasingly scarce,” said NAHB Chairman Jerry
Konter. “With the housing sector in a recession, the Biden administration
and new Congress must turn their focus to policies that lower the cost of
building and allow the nation’s home builders to expand housing production.”
To
bring more buyers into the marketplace, 59% of builders report using
incentives, with a big increase in usage from September to November. For
example, in November, 25% of builders say they are paying points for buyers, up
from 13% in September. Mortgage rate buy-downs rose from 19% to 27% over the
same time frame. And 37% of builders cut prices in November, up from 26% in
September, with an average price of reduction of 6%. This is still far below
the 10%-12% price cuts seen during the Great Recession in 2008.
“Even
as home prices moderate, building costs, labor and materials -- particularly
for concrete -- have yet to follow,” said NAHB Chief Economist Robert Dietz.
“To ease the worsening housing affordability crisis, policymakers must seek
solutions that create more affordable and attainable housing. With inflation
showing signs of moderating, this includes a reduction in the pace of the
Federal Reserve’s rate hikes and reducing regulatory costs associated with land
development and home construction.”
The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.
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