Builders
started construction of privately-owned housing units in
October at a seasonally adjusted annual rate (SAAR) of 1,372,000 units (1.350
million expected).
This is 1.9% (±13.5%)* above the revised September estimate of 1,346,000
(originally 1.358 million units), but 4.2% (±10.0%)* below the October 2022 SAAR
of 1,432,000 units; the not-seasonally adjusted YoY change (shown in the table
above) was -5.1%.
Single-family
housing starts in October were at a SAAR of 970,000; this is 0.2% (±8.8%)*
above the revised September figure of 968,000 units (+12.4% YoY). Multi-family:
402,000 units (+6.3% MoM; -30.9% 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 1,410,000. This is 4.6% (±11.6%)* below the
revised September estimate of 1,478,000 (originally 1.453 million units), but 4.6%
(±13.2%)* above the October 2022 SAAR of 1,348,000 units; the NSA comparison: +3.5%
YoY.
Single-family housing completions in October were at a SAAR of 993,000; this is 0.9% (±12.3%)* below the revised September rate of 1,002,000 units (+0.8% YoY). Multi-family: 417,000 units (-12.4% MoM; +10.2% YoY).
Total
permits were at a SAAR of 1,487,000 units (1.463 million expected). This is 1.1%
above the revised September rate of 1,471,000 (originally 1.473 million units),
but 4.4% below the October 2022 SAAR of 1,555,000 units; the NSA comparison: -0.4%
YoY.
Single-family authorizations in October were at a rate of 968,000; this is 0.5% above the revised September figure of 963,000 units (+19.0% YoY). Multi-family: 519,000 units (+2.2% MoM; -23.0% YoY).
Press
release from NAHB’s Robert Dietz:
“High
mortgage rates that approached 8% earlier this month continue to hammer builder
confidence, but recent economic data suggest housing conditions may improve in
the coming months.
“Builder
confidence in the market for newly built single-family homes in November fell
six points to 34 in November, according to the National Association of Home
Builders (NAHB)/Wells Fargo Housing Market Index (HMI). This is the fourth
consecutive monthly drop in builder confidence, as sentiment levels have
declined 22 points since July and are at their lowest level since December
2022. Also of note, nearly the entire HMI data for November was collected
before the latest Consumer Price Index was released and showed that inflation
is moderating.
“The
rise in interest rates since the end of August has dampened builder views of
market conditions, as a large number of prospective buyers were priced out of
the market. Moreover, higher short-term interest rates have increased the cost
of financing for home builders and land developers, adding another headwind for
housing supply in a market low on resale inventory. While the Federal Reserve
is fighting inflation, state and local policymakers could also help by reducing
the regulatory burdens on the cost of land development and home building,
thereby allowing more attainable housing supply to the market.
“While
builder sentiment was down again in November, recent macroeconomic data point
to improving conditions for home construction in the coming months. In
particular, the 10-year Treasury rate moved back to the 4.5% range for the
first time since late September, which will help bring mortgage rates close to
or below 7.5%. Given the lack of existing home inventory, somewhat lower
mortgage rates will price-in housing demand and likely set the stage for
improved builder views of market conditions in December.
“NAHB
is forecasting approximately a 5% increase for single-family starts in 2024 as
financial conditions ease with improving inflation data in the months ahead.
“But
with mortgage rates running above 7% since mid-August, per Freddie Mac data,
many builders continue to reduce home prices to boost sales. In November, 36%
of builders reported cutting home prices, up from 32% in the previous two
months. This is the highest share of builders cutting prices during this cycle,
tying the previous high point set in November 2022. The average price reduction
in November remained at 6%, unchanged from the previous month. Meanwhile, 60%
of builders provided sales incentives of all forms in November, down slightly
from 62% in October.”
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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