| Consensus | Consensus Range | Actual | Previous | Revised | |
|---|---|---|---|---|---|
| Starts - Annual Rate | 1.3M | 1.3M to 1.4M | 1.311M | 1.354M | 1.353M |
| Permits - Annual Rate | 1.4M | 1.4M to 1.5M | 1.416M | 1.428M | 1.425M |
Highlights
Starts of new homes in October are down 3.1 percent to 1.311 million units at a seasonally adjusted annual rate after 1.353 million units in September, and down 4.0 percent from 1.365 million units in October 2023. The October level is close to the consensus of 1.300 million units in the Econoday survey of forecasters. Some housing starts may have been delayed by the impacts of Hurricanes Helene and Milton as resources were diverted to disaster recovery efforts. However, the decline also reflects soft conditions as homebuilders adjust to less demand for new single-family homes at a time when mortgage rates are less favorable and there is more existing housing stock to compete for buyers.
Single-family home starts are down 6.9 percent to 970,000 units in October from September and down 0.5 percent from 975,000 a year ago. The period of uncertainty in the weeks leading up to the US presidential election meant that homebuilders and potential buyers were cautious about committing to a new home. That is likely to change in November, although mortgage rates remain elevated with few expectations of another dip in the near future.
Multi-unit home starts are up 9.6 percent to 341,00 in October from the prior month, and down 12.6 percent from 390,000 in October 2023. Overall, levels of starts for multi-units remain low at a time when the pool of homebuyers are more likely to opt for a single-family unit.
Permits issued in October are down 0.6 percent to 1.416 million after an essentially unrevised 1.425 million in September, and are down 7.7 percent from 1.534 million in October 2023. The October level is a near match with the consensus of 1.400 million in the Econoday survey. Again, there are probably some impacts from the hurricanes that devastated large parts of the Southeast. After a trickle in October, in November, the number of permits is likely to rise as homes flattened by storms are bulldozed and rebuilt from the ground-up.
Permits issued for single-family homes is up 0.5 percent in October to 968,000 and down 1.8 percent from 986,000 in October 2023. The number of permits issued has been essentially unchanged for the last three months, suggesting relatively stable demands for new construction of single-family units. Multi-unit permits are down 3.0 percent to 448,000 in October and down 18.2 percent from 548,000 a year ago. Demand for multi-unit projects tends to be quite uneven.
Single-family home starts are down 6.9 percent to 970,000 units in October from September and down 0.5 percent from 975,000 a year ago. The period of uncertainty in the weeks leading up to the US presidential election meant that homebuilders and potential buyers were cautious about committing to a new home. That is likely to change in November, although mortgage rates remain elevated with few expectations of another dip in the near future.
Multi-unit home starts are up 9.6 percent to 341,00 in October from the prior month, and down 12.6 percent from 390,000 in October 2023. Overall, levels of starts for multi-units remain low at a time when the pool of homebuyers are more likely to opt for a single-family unit.
Permits issued in October are down 0.6 percent to 1.416 million after an essentially unrevised 1.425 million in September, and are down 7.7 percent from 1.534 million in October 2023. The October level is a near match with the consensus of 1.400 million in the Econoday survey. Again, there are probably some impacts from the hurricanes that devastated large parts of the Southeast. After a trickle in October, in November, the number of permits is likely to rise as homes flattened by storms are bulldozed and rebuilt from the ground-up.
Permits issued for single-family homes is up 0.5 percent in October to 968,000 and down 1.8 percent from 986,000 in October 2023. The number of permits issued has been essentially unchanged for the last three months, suggesting relatively stable demands for new construction of single-family units. Multi-unit permits are down 3.0 percent to 448,000 in October and down 18.2 percent from 548,000 a year ago. Demand for multi-unit projects tends to be quite uneven.
Market Consensus Before Announcement
Forecasters see housing starts a little soft at a 1.3 million unit rate in October versus 1.4 million in September. Permits are expected flat at 1.4 million versus 1.4 million in September.
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.
