Starts & Permits | Noise-Free Highs

Takeaway: September Housing Starts offer further evidence that Housing continues to trend in the right direction.

Our Hedgeye Housing Compendium table (below) aspires to present the state of the housing market in a visually-friendly format that takes about 30 seconds to consume.

Starts & Permits | Noise-Free Highs - Compendium 102015 

Today’s Focus:  September Housing Starts & Permits

With the residual distortion in the July/Aug Starts data following the NY tax exemption pull-forward in May/June now rearview, this morning’s data for September provides the first (largely) noise-free read on the underlying trend in new resi construction activity in 5-months. 

Total Starts rose +6.5% month-over-month and accelerated to +18% year-over-year with activity rebounding back to the 8-year highs recorded in June.  Multi-family activity led the advance, rising +18.3% month-over-month (not overly surprising given the post-pull forward hangover) and +28% year-over-year.  MF permits, which have been exceedingly volatile on a month-to-month basis, dropped -12.1% sequentially while retreating to +1% YoY.  

The gain in single-family starts was more muted with activity rising just +0.3% sequentially with year-over-year growth holding at +12%.   SF activity continues to hold near post-crisis highs, growing +11% YoY on average YTD and flirting with 700K in average starts annually for the first time since 2007.

The crawling but continued rise in new resi construction activity continues to accord with the ongoing advance in Builder Confidence which made another new 10-year high in yesterday’s HMI print for October (HERE).  With ~38% upside left to LT average levels of SF construction and 250% upside to the prior peak, the MT/LT mean reversion and cycle opportunity for the sector remains conspicuous.   

Starts & Permits | Noise-Free Highs - Total Starts LT

Starts & Permits | Noise-Free Highs - Total   SF Starts 2Y

Starts & Permits | Noise-Free Highs - MF Starts   Permits LT

Starts & Permits | Noise-Free Highs - MFF Starts   Permits TTM

Starts & Permits | Noise-Free Highs - SF Starts   Permits LT 

Starts & Permits | Noise-Free Highs - SF Starts   Permits TTM

About Housing Starts & Permits:

The US Census Bureau records the number of new housing units that have obtained permits for construction and those that have begun construction. This data includes new buildings intended primarily as residential units. The US Census Bureau defines a start as, “Start of construction occurs when excavation begins for the footings or foundation of a building.” 

Joshua Steiner, CFA

Christian B. Drake