US housing starts fell less than expected last month, data out Tuesday showed, but that was where the good news stopped.
The 1.427 million pace was above estimates. Consensus expected 1.4 million from the headline starts print. The range, from five-dozen economists, was 1.25 million to 1.45 million.
November’s 0.5% drop, small as it was, marked the third straight monthly decline and the fourth in five (figure below).
The pace is well off the highs, but still above levels observed prior to the pandemic.
A relative dearth of supply is bolstering prices in the US despite a burgeoning buyer’s strike tied to mortgage rates that are more than double those observed at the lows. Builders are grappling with crimped margins from elevated construction costs, limiting their capacity to offer incentives to reluctant buyers. It’s not a happy conjuncture.
The Commerce Department’s report kicked off a raft of US housing figures due this week prior to the holiday. A key gauge of builder sentiment fell a 12th month in December, the NAHB said Monday, in another generally downbeat assessment of market conditions.
Single-family starts, which track the NAHB’s gauge closely, dropped to an annualized 828,000 pace last month, Tuesday’s data showed.
November’s decline was the eighth in nine months and marked the fifth month below the 1 million pace threshold (figure above).
Permits missed badly. The 1.342 million pace was well below the lowest estimate (1.423 million) and counted as the slowest since June of 2020.
The MoM decline, at more than 11%, was very large (figure below).
Single-family permits dropped 7%, and those for structures with five or more units tumbled almost 18% from October. On a YoY basis, single-family permits fell 30%.
All in all, this was an uninspired release. Although completions rose sharply, the drop in single-family starts and permits appeared ominous vis-à-vis the supply shortfall that’s contributing to buoyant prices. Absent a larger (and sustained) drop in mortgage rates, prices need to fall in order to improve demand.
Like so many other macro dynamics in 2022, this is a chicken-egg dilemma that admits of no easy answers.
About 49% of people aged 18-29 are currently living at home with parents (total population for that group is about 50M). This is almost a record high. In addition, a record number of people up to the age of 40 are reportedly living with parents, because they can’t afford housing. These people are saving money (even if paying some rent to parents) and treating themselves to luxury goods and going out for eating and entertainment with friends.
This group has a lot of pent up demand for housing. Either they will get sick of living with their parents or their parents will give them money to leave (haha). At that point, a lot of demand will be released for housing.