| Consensus | Consensus Range | Actual | Previous | Revised | |
|---|---|---|---|---|---|
| Starts - Annual Rate | 1.362M | 1.313M to 1.400M | 1.382M | 1.427M | 1.401M |
| Permits - Annual Rate | 1.380M | 1.340M to 1.400M | 1.330M | 1.342M | 1.351M |
Highlights
Housing starts are down 1.4 percent in December to 1.382 million units after a downward revision to 1.041 million units in November. The December level was slightly above the consensus of 1.362 million units in an Econoday survey. Starts are down 21.8 percent compared to 1.768 million units in December 2021.
The dip in December 2022 was entirely due to a 19.0 percent decline in starts of multi-unit homes to 473,000 after 584,000 in November, and are down 14.9 percent compared to a year ago. In recent months it has been multi-units that provided some offset to declining starts for single-family homes as buyers opted for smaller, less expensive homes while mortgage rates were rising. However, starts of single-family homes rose 11.3 percent to 909,000 in December after 817,000 in November, although these are down 25.0 percent from a year ago. An easing in mortgage rates back closer to 6 percent from the over 7 percent peak in September, and more power to negotiate price may have sent qualified home buyers back to the single-family home market. Homebuilders responded accordingly.
The number of permits issued is down 1.6 percent to 1.330 million units in December after 1.351 million in November, and is down 29.9 percent from a year earlier. The reading is below the consensus of 1.380 million units in an Econoday survey.
The uptick in starts in December does not appear to have much momentum for future months. Single-family permits are down 6.5 percent to 730,000 in December after 781,000 in November, and are the lowest since 850,000 in June 2020 when the closures in the early months of the pandemic restrained activity. Outside the March-June 2020 period, permits for single-family homes are the lowest since 721,000 in July 2016. For multi-unit homes, permits issued are up 5.3 percent to 600,000 in December from 570,000, but are down 22.9 percent compared to December 2021.
The dip in December 2022 was entirely due to a 19.0 percent decline in starts of multi-unit homes to 473,000 after 584,000 in November, and are down 14.9 percent compared to a year ago. In recent months it has been multi-units that provided some offset to declining starts for single-family homes as buyers opted for smaller, less expensive homes while mortgage rates were rising. However, starts of single-family homes rose 11.3 percent to 909,000 in December after 817,000 in November, although these are down 25.0 percent from a year ago. An easing in mortgage rates back closer to 6 percent from the over 7 percent peak in September, and more power to negotiate price may have sent qualified home buyers back to the single-family home market. Homebuilders responded accordingly.
The number of permits issued is down 1.6 percent to 1.330 million units in December after 1.351 million in November, and is down 29.9 percent from a year earlier. The reading is below the consensus of 1.380 million units in an Econoday survey.
The uptick in starts in December does not appear to have much momentum for future months. Single-family permits are down 6.5 percent to 730,000 in December after 781,000 in November, and are the lowest since 850,000 in June 2020 when the closures in the early months of the pandemic restrained activity. Outside the March-June 2020 period, permits for single-family homes are the lowest since 721,000 in July 2016. For multi-unit homes, permits issued are up 5.3 percent to 600,000 in December from 570,000, but are down 22.9 percent compared to December 2021.
Market Consensus Before Announcement
December's annualized rates are expected at 1.362 million for starts and 1.380 million for permits which would compare with 1.427 and 1.342 million in November.
Definition
Housing starts measure the initial construction of single-family and multi-family units on a monthly basis. Data on permits provide indications of future construction. A housing start is registered at the start of construction of a new building intended primarily as a residential building. The start of construction is defined as the beginning of excavation of the foundation for the building.
Description
Two words: Ripple Effect. This narrow piece of data has a powerful multiplier effect through the economy, and therefore across the markets and your investments. By tracking economic data such as housing starts, investors can gain specific investment ideas as well as broad guidance for managing a portfolio.
Home builders usually don't start a house unless they are fairly confident it will sell upon or before its completion. Changes in the rate of housing starts tell us a lot about demand for homes and the outlook for the construction industry. Furthermore, each time a new home is started, construction employment rises, and income will be pumped back into the economy. Once the home is sold, it generates revenues for the home builder and a myriad of consumption opportunities for the buyer. Refrigerators, washers and dryers, furniture, and landscaping are just a few things new home buyers might spend money on, so the economic"ripple effect" can be substantial especially when you think of it in terms of more than a hundred thousand new households around the country doing this every month.
Since the economic backdrop is the most pervasive influence on financial markets, housing starts have a direct bearing on stocks, bonds and commodities. In a more specific sense, trends in the housing starts data carry valuable clues for the stocks of home builders, mortgage lenders, and home furnishings companies. Commodity prices such as lumber are also very sensitive to housing industry trends.
Importance
The housing starts report is the most closely followed report on the housing sector. Housing starts reflect the commitment of builders to new construction activity. Purchases of household furnishings and appliances quickly follow.
Interpretation
The bond market will rally when housing starts decrease, but bond prices will fall when housing starts post healthy gains. A strong housing market is bullish for the stock market because the ripple effect of housing to consumer durable purchases spurs corporate profits. In turn, low interest rates encourage housing construction.
The level as well as changes in housing starts reveals residential construction trends. Housing starts are subject to substantial monthly volatility, especially during winter months. It takes several months to establish a trend. Thus, it is useful to look at a 5-month moving average (centered) of housing starts.
It is useful to examine the trends in construction activity for single homes and multi-family units separately because they can deviate significantly. Single-family home-building is larger and less volatile than multi-family construction. It is more sensitive to interest rate changes and less speculative in nature. The construction of multi-family units can be substantially influenced by changes in the tax code and speculative real estate investors.
Housing construction varies by region as well. The regions of the United States do not all follow exactly the same economic patterns because industry concentration varies in the four major regions of the country. The regional dispersion can mask underlying trends. The total level of housing construction as well as the regional distribution of housing construction is important.
Housing permits are released together with housing starts every month and are considered a leading indicator of starts. In reality, housing permits and starts typically move in tandem each month. However, there are some exceptions. For instance, if permits are issued late in the month, and weather does not permit immediate excavation, then permits might lead starts. For the most part, though, permits are not a good predictor of future housing starts. Incidentally, housing permits (but not starts) are one of the ten components of the index of leading indicators compiled by The Conference Board.
Home builders usually don't start a house unless they are fairly confident it will sell upon or before its completion. Changes in the rate of housing starts tell us a lot about demand for homes and the outlook for the construction industry. Furthermore, each time a new home is started, construction employment rises, and income will be pumped back into the economy. Once the home is sold, it generates revenues for the home builder and a myriad of consumption opportunities for the buyer. Refrigerators, washers and dryers, furniture, and landscaping are just a few things new home buyers might spend money on, so the economic"ripple effect" can be substantial especially when you think of it in terms of more than a hundred thousand new households around the country doing this every month.
Since the economic backdrop is the most pervasive influence on financial markets, housing starts have a direct bearing on stocks, bonds and commodities. In a more specific sense, trends in the housing starts data carry valuable clues for the stocks of home builders, mortgage lenders, and home furnishings companies. Commodity prices such as lumber are also very sensitive to housing industry trends.
Importance
The housing starts report is the most closely followed report on the housing sector. Housing starts reflect the commitment of builders to new construction activity. Purchases of household furnishings and appliances quickly follow.
Interpretation
The bond market will rally when housing starts decrease, but bond prices will fall when housing starts post healthy gains. A strong housing market is bullish for the stock market because the ripple effect of housing to consumer durable purchases spurs corporate profits. In turn, low interest rates encourage housing construction.
The level as well as changes in housing starts reveals residential construction trends. Housing starts are subject to substantial monthly volatility, especially during winter months. It takes several months to establish a trend. Thus, it is useful to look at a 5-month moving average (centered) of housing starts.
It is useful to examine the trends in construction activity for single homes and multi-family units separately because they can deviate significantly. Single-family home-building is larger and less volatile than multi-family construction. It is more sensitive to interest rate changes and less speculative in nature. The construction of multi-family units can be substantially influenced by changes in the tax code and speculative real estate investors.
Housing construction varies by region as well. The regions of the United States do not all follow exactly the same economic patterns because industry concentration varies in the four major regions of the country. The regional dispersion can mask underlying trends. The total level of housing construction as well as the regional distribution of housing construction is important.
Housing permits are released together with housing starts every month and are considered a leading indicator of starts. In reality, housing permits and starts typically move in tandem each month. However, there are some exceptions. For instance, if permits are issued late in the month, and weather does not permit immediate excavation, then permits might lead starts. For the most part, though, permits are not a good predictor of future housing starts. Incidentally, housing permits (but not starts) are one of the ten components of the index of leading indicators compiled by The Conference Board.
