| Consensus | Consensus Range | Actual | Previous | Revised | |
|---|---|---|---|---|---|
| Starts - Annual Rate | 1.340M | 1.250M to 1.450M | 1.289M | 1.311M | 1.312M |
| Permits - Annual Rate | 1.430M | 1.311M to 1.450M | 1.505M | 1.416M | 1.419M |
Highlights
Housing starts are down 1.8 percent in November to a seasonally adjusted annual rate of 1.289 million units after a negligible upward revision to 1.312 million units in October. The November level is below the consensus of 1.340 million units in the Econoday survey of forecasters. Total starts are down 14.6 percent compared to November 2023. Overall, starts of new homes remains soft at a time when mortgage rates are relatively high. Also, the supply of existing homes is more abundant after a period of scarcity in the past couple of years while homeowners held on to their low mortgage rates.
The month-over-month decrease in November is entirely due to a drop in multi-unit starts of 23.2 percent to 278,000 units, the lowest since 258,000 units in March. It is down 27.6 percent from November 2023. The multi-unit sector can be volatile. At present, homebuyers are more inclined to opt for a single-family home if affordability lines up. Starts of single-family homes are up 6.4 percent in November to 1.011 million units from October, but down 10.2 percent from the year ago month.
Building permits issued in November are up 6.1 percent to 1.505 million after 1.419 million unitions in October, and little changed from a year ago at down 0.2 percent from November 2023. The November level of permits is well above the consensus of 1.430 million in the Econoday survey. Some of this will be permitting to replace housing destroyed in Hurricanes Helene and Milton in late September and early October. However, it also suggests some shifts in expected preferences of homebuyers.
Permits issued for single-family homes edge up 0.1 percent to 972,000 in November and have been little changed in the past four months. Single-family permits are down 2.7 percent year-over-year. Permits for multi-unit projections jump 19.0 percent in November to 533,000 and are up 4.7 percent year-over-year. This is the highest since 536,000 in February.
The month-over-month decrease in November is entirely due to a drop in multi-unit starts of 23.2 percent to 278,000 units, the lowest since 258,000 units in March. It is down 27.6 percent from November 2023. The multi-unit sector can be volatile. At present, homebuyers are more inclined to opt for a single-family home if affordability lines up. Starts of single-family homes are up 6.4 percent in November to 1.011 million units from October, but down 10.2 percent from the year ago month.
Building permits issued in November are up 6.1 percent to 1.505 million after 1.419 million unitions in October, and little changed from a year ago at down 0.2 percent from November 2023. The November level of permits is well above the consensus of 1.430 million in the Econoday survey. Some of this will be permitting to replace housing destroyed in Hurricanes Helene and Milton in late September and early October. However, it also suggests some shifts in expected preferences of homebuyers.
Permits issued for single-family homes edge up 0.1 percent to 972,000 in November and have been little changed in the past four months. Single-family permits are down 2.7 percent year-over-year. Permits for multi-unit projections jump 19.0 percent in November to 533,000 and are up 4.7 percent year-over-year. This is the highest since 536,000 in February.
Market Consensus Before Announcement
Starts are seen at an annual 1.340 million and permits at 1.430 million in November, up from 1.311 million and 1.416 million in October.
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.
