Builders
started construction of privately-owned housing units
in November at a seasonally adjusted annual rate (SAAR) of 1,427,000 units (1.400
million expected).
This is 0.5% (±12.3%)* below the revised October estimate of 1,434,000
(originally 1.425 million units) and 16.4% (±13.4%) below the November 2021 SAAR
of 1,706,000 units; the not-seasonally adjusted YoY change (shown in the table
above) was -15.1%.
Single-family
starts in November were at a SAAR of 828,000; this is 4.1% (±11.3%)* below the
revised October figure of 863,000 units (-32.6% YoY). Multi-family: 599,000
units (+4.9% MoM; +25.3% 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 1,490,000. This is 10.8% (±15.8%)* above the
revised October estimate of 1,345,000 (originally 1.339 million units) and 6.0%
(±17.6%)* above the November 2021 rate of 1,406,000 units; the NSA comparison:
+8.1% YoY.
Single-family completions were at a SAAR of 1,047,000; this is 9.5% (±12.9%)* above the revised October rate of 956,000 units (+11.3% YoY). Multi-family: 443,000 units (+13.9% MoM; +0.6% YoY).
Total
permits were at a SAAR of 1,342,000 units (1.495 million expected). This is
11.2% below the revised October rate of 1,512,000 (originally 1.526 million
units) and 22.4% below the November 2021 SAAR of 1,729,000 units; the NSA
comparison: -23.8% YoY.
Single-family permits were at a rate of 781,000; this is 7.1% below the revised October figure of 841,000 units (-31.4% YoY). Multi-family: 561,000 units (-16.4% MoM; -11.9% YoY).
High
mortgage rates, elevated construction costs running well above the inflation
rate and flagging consumer demand due to deteriorating affordability conditions
have dragged builder sentiment down every month in 2022.
Builder
confidence in the market for newly built single-family homes posted its 12th
straight monthly decline in December, dropping two points to 31, according to
the National Association of Home Builders (NAHB)/Wells Fargo Housing Market
Index (HMI). This is the lowest confidence reading since mid-2012, with the
exception of the onset of the pandemic in the spring of 2020.
“In
this high inflation, high mortgage rate environment, builders are struggling to
keep housing affordable for home buyers,” said NAHB Chairman Jerry
Konter. “Our latest survey shows 62% of builders are using incentives to
bolster sales, including providing mortgage rate buy-downs, paying points for
buyers and offering price reductions. But with construction costs up more than
30% since inflation began to take off at the beginning of the year, there is
little room for builders to cut prices. Only 35% of builders reduced homes
prices in December, edging down from 36% in November. The average price
reduction was 8%, up from 5% or 6% earlier in the year.”
“The
silver lining in this HMI report is that it is the smallest drop in the index
in the past six months, indicating that we are possibly nearing the bottom of
the cycle for builder sentiment,” said NAHB Chief Economist Robert Dietz.
“Mortgage rates are down from above 7% in recent weeks to about 6.3% today, and
for the first time since April, builders registered an increase in future sales
expectations.”
Dietz
added that in this tenuous economic climate, builders still need to plan a year
or more out when thinking about land and construction timelines. “NAHB is
expecting weaker housing conditions to persist in 2023, and we forecast a
recovery coming in 2024, given the existing nationwide housing deficit of 1.5
million units and future, lower mortgage rates anticipated with the Fed easing
monetary policy in 2024.”
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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