U.S. Housing Starts and Permits (October 2023)

U.S. housing starts expanded in October despite higher rates

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• Housing starts increased 1.9% month-on-month (m/m) in October to 1.37 million (annualized) units - slightly above the consensus expectation for 1.35 million units. Revisions to the two prior months were positive, adding roughly 24k units to the previous reported tallies.

• Starts in the single-family segment grew marginally by 0.2% m/m (or 2k units), ticking up for a second consecutive month. Multi-family starts increased by 6.4% m/m (or 24k units) and continued to recover from the large decline seen over the summer.

• Residential permits grew by 1.1% m/m to 1.49 million units. Single-family permits grew for a ninth consecutive month, but at the slowest pace (+0.5% m/m) during that time, while multi-family permits expanded by 2.2% m/m.

• Monthly changes in residential construction among the four Census regions varied in October. Increases were recorded in the Midwest (+28.4%) and the West (+12.5%), while the Northeast (-14.5%) and South (-6.8%) saw declines.

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• Homebuilding activity has fluctuated over the past few months as interest rates reached fresh cycle highs. The rebound in single-family starts seen at the start of the year has plateaued, while starts in the multi-family segment have staged a partial recovery from the steep drop seen over the summer. In October, residential construction was roughly 7.5% above the pre-pandemic pace for the month, primarily stemming from relative strength in the single-family segment.

• The National Association of Home Builders sentiment index declined for a fourth consecutive month in November, falling to its lowest level of the year. While the survey results used to compile the index were collected prior to the decline in Treasury yields seen in recent weeks, this is not expected to provide substantial tailwinds to residential construction as financing conditions remain tight. The thirteen year low in resale listings will continue to sustain demand for new units, but persistent affordability challenges are expected to remain a material headwind over the near-term.