October housing starts exceed expectations with new construction surging

November 17, 2017

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By Scott Volling

Today’s release of new residential construction data for October reflects strength in both starts and permits. Both metrics exceeded expectations, with starts coming in 8.9% above consensus at 1,290,000 and permits equally strong at 1,297,000, 4.6% above consensus. Combined, these are the strongest numbers we have seen since October of last year when starts were 1,328,000 and permits were 1,285,000. Single family starts also remained strong at 877,000, slightly above the October 2016 number of 871,000.  The volatile multi-family number dropped 12% from last year to 393,000, but this is also 37% higher than last month.

The strength in starts and permits this month comes on the heels of yesterday’s rise in home builder sentiment to an 8-month high. While builders continue to face rising costs and a challenging environment for labor and land, they are buoyed up by a shortage of existing homes for sale which is driving buyers to new homes. With no end in sight to the inventory shortage, and with builders now largely moving past the impacts of Harvey and Irma, we think the October numbers could signify the start of a multi-month trend of strong starts and permits leading up to the start of the spring selling season in February.

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