• U.S. housing starts rose by 3.8% to 1.31 million (annualized) units in October, after declining by 7.9% in September. This was close to market expectations for a 5.1% increase.
  • The increase was broad based, with both single and multi-family starts coming in higher. Single-family starts rose by 2.0% to 936k, while the more volatile multi-family segment posted a larger gain of 8.6% to 378k.
  • Permits exhibited a similar narrative to starts, rising by 5.0% on the month after falling by 2.4% the month prior. Single-family permits continued their six-month advancing streak, rising by 3.2%. Multifamily permits also rose by 8.2%, reversing September’s 7.3% decline.
  • Regionally, starts generally turned positive, with only the Northeast posting a notable decline of 21.9%. The West, Midwest and South were up by 17.6%, 8.7% and 0.7% respectively.

Key Implications

  • After a retrenchment in September, starts rebounded in October. While the headline gain was modest, the relatively broad-based increases reflected in the details suggest a housing market poised for improvement.
  • Lower mortgage rates and solid employment prospects have enticed more buyers into the housing market, with a lack of available inventory acting as the main constraint. The good news is that U.S. home builder sentiment remains elevated and builders’ optimism for sales in the next six months has risen to the highest level since May last year.
  • Elevated sentiment, along with a rise in permits, particularly the six-month consecutive rise in single family permits, bodes well for future construction activity. As such, residential investment, which has subtracted from economic activity in recent history, but turned positive in Q3, is expected to continue to do so over the next year.

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