New Construction Defies Dour Builder Sentiment In Distorted US Housing Market

New construction bucked the dour trend in homebuilder sentiment to post a surprise monthly gain in the last of this week’s US macro data.

Housing starts rose to a 1.372 million annual rate in October, the Census Bureau said. Economists expected 1.35 million. The range of estimates, from more than 50 extensively-trained experts, was 1.25 million to 1.43 million. The prior month was revised lower.

The second consecutive monthly gain for the headline was notable in the context of an ongoing malaise in homebuilder sentiment, which dropped a fourth month in November to the lowest since the end of last year.

Typically, poor builder sentiment bodes ill for housing starts, but as noted here on Thursday, “this cycle is different in too many ways to count.”

Single-family starts ran at the briskest pace since July, as did multifamily construction.

You may recall that the pace of multifamily starts recently receded to the slowest in three years. That rate picked up, but it’s worth noting that October’s pace as initially reported merely matched the originally-reported pace from September, which was revised lower on Friday.

It’s notable (or maybe mentionable is better) that single-family starts actually rose in September and October despite deteriorating NAHB sentiment.

The story remains the same and is unlikely to change much in the near- or even medium-term. New construction is the only game in town for would-be homeowners, so despite the myriad challenges both for buyers and builders, the construction show must go on.

Permits beat expectations in Friday’s release, rising to a 1.487 million pace against expectations for 1.45 million.

Single-family permits ran at the fastest rate since May of 2022, when higher mortgage rates started to bite in earnest.

I don’t think there’s a lot to be gleaned from these figures other than the mildly interesting juxtaposition between steady new construction and depressed builder sentiment.

A quick look at the breakdown showed starts in the Northeast were the lowest in two years, while those in the affordable South (and readers will forgive the adjective — I do realize “affordable” is a highly relative term in the post-pandemic housing environment) were the slowest of 2023.