- U.S. housing starts increased by 1.2% to 1.55 million (annualized) units in November. This was appreciably better than the consensus forecast, which called for a modest 0.3% increase. The November release also included downward revisions to the October and September prints (-24k in total).
- Unlike previous months, the November gains were broad-based, with single and multi-family starts coming in higher. Single-family starts rose by a modest 0.4% to 1.19 million, extending their winning streak to seven straight months. In the more volatile multi-family segment, starts increased by 4% to 361k.
- Building permits also showed considerable strength, rising by 6.2% on the month after a 0.1% contraction in October. Like starts, single-family permits (+1.3%) continued to increase, advancing for seven straight months, while multifamily permits (+19.2%) rose for the first time in four months.
- The regional outturn was a mixed bag with starts advancing in two of the four major regions and declining in the other two. They were up big in the Northeast (+58.8%) in particular, and also increased in the West (+8.2%). By contrast, they were down in the South (-6%) and the Midwest (-4.9%).
Key Implications
- Housing starts continue to defy expectations. Today’s report was a positive surprise, considering that a slowdown of sorts was expected given their strong pace of growth in recent months. The residential construction sector’s overall performance has decidedly been a positive one this year, with starts increasing in 6 of the past 7 months and rebounding within 1.3% of their pre-crisis levels. The November gains were driven by a bounce-back in multi-family starts, which had struggled of late in light of shifting housing demand in favor of bigger homes and more outdoor space.
- However, with new COVID-19 cases surging to record highs and restrictions making a comeback in several states, there is no shortage of near-term challenges for homebuilders. Builder confidence eased somewhat after soaring to new all-time highs in each of the past 3 months. The outlook is also muddied by looming affordability issues, as construction costs continue to rise and inventories remain low. These trends are expected to weigh on housing demand through 2021.
