Housing strong for second straight month

December 19, 2017

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By Scott Volling

Housing starts and permits for November both exceeded consensus estimates, boosted by the highest number of single family starts since September 2007. This is a positive sign, as it shows builders continue to shift focus to the pent-up demand in the single family segment, which should benefit consumers as more inventory enters a tight market. With the impacts from hurricanes Harvey and Irma now largely in the rearview mirror for builders, this is the second straight month of strength in both starts and permits and a trend we expect to continue into what may be the strongest spring selling season since before the recession.

Total November starts of 1,297,000 – the highest in more than a year – beat consensus estimates of 1,250,000 by 3.8% and was 12.9% higher than November 2016. Single family starts of 930,000 rose 3.3% over last month and 12.9% compared to last year. While permits dropped 1.4% from October, to 1,298,000, this is still a very positive result as the October number was revised upward to 1,316,000, the highest since June 2015. The volatile multi-family segment came in at 359,000, 10% higher than last year and essentially flat compared to the revised October number.

Today’s positive housing starts report follows yesterday’s release of the monthly home builder sentiment index, reaching the highest level since 1999, with a significant gain in the foot traffic component of the metric driving much of the gain. This is reflective of the limited supply of existing homes for sale on the market, which continues to drive home buyers to new home communities. Importantly, the rise in builder sentiment comes at a time when the new tax bill was taking shape. After some early concerns expressed by builders and realtors about the removal of key measures supporting the industry, both groups appear optimistic about provisions that retain aspects of the mortgage interest deduction and property tax deduction, in addition to other components of the bill that are expected to benefit businesses as a whole.

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