Today's Focus: October Starts & Permits
History became legend. Legend became myth and for twelve and a half years, rumors grew of a single-family shadow, whispers of a nameless recovery ….
So, it turns out the Urban Legends are true after all. The elusive 9-handle does exist. After stalking it for more than a decade, October succeeded where 146 consecutive months have failed as Single-family Permits breached 900K for the first time since 2007
Headline New Construction activity for October rose +3.8% sequentially while accelerating to an 18-month RoC high at +8.5% Y/Y. Across the internals, it was all positive as well with SF Starts improving against positively revised September estimates while accelerating for a 5th consecutive month to +8.21% Y/Y.
The improvement also offers some positive confirmation of yesterday’s HMI for November which showed Builder Sentiment holding at recent highs (the HMI Headline ticked down a point off but 3 of 4 geographies posted sequential gains so read that how you’d like).
Fabricated Lord of the Rings dramatics aside, the October gain was largely unsurprising and the broader setup remains largely unchanged:
- Residual rate tailwinds, organic improvement and an increasingly favorable comp setup will continue to support RoC solidity in New Construction activity through 4Q, at least.
- The gain in SF Permits continues to signal SF Starts activity is set to remain solid nearer-term.
- Continued supply constraints in the existing market, the ongoing shift toward entry level construction and the collapsing price spread between new and existing homes should continue to favor new construction demand on the margin.
- Pulling the cycle curtain back, the resi housing cycle remains mid-ish cycle and continues to carry one of the more positively asymmetric longer-term setups in all of domestic macro.
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.”
