Housing Strengthens Further In October - November 20, 2012
Homebuilding picked up some further momentum in October, with housing starts rising to an annualized rate of 894,000 units for the latest month. That was well ahead of the downwardly revised September housing number of 863,000 homes. Initially, the housing estimate for September had been 872,000 units. Expectations had been that starts would have declined to just 833,000 homes last month.
Encouragingly, the latest figures represented the highest level of housing starts in more than four years, as this formerly bruised and battered sector continues its impressive recovery. True, we are still well down from the early 2006 pace of building, in which housing starts had been above 2.3 million annual units for a brief time. However, we also are more than 80% above the multi-decade low reached earlier in the long down cycle. In fact, new building is up 41.9% from a year earlier.
Meanwhile, Hurricane Sandy had only a minimal effect on the total housing market, as the storm hit during the final three days of the month, and was largely confined to the Northeast, which is the smallest of the four regional markets. Not surprisingly, housing starts did fall in that region, declining from 77,000 units, on an annualized basis in September, to 72,000 units in the latest month. Starts, by comparison, rose in the Midwest, the second smallest of the four regions, and in the West, the second largest region. In the South, this pre-eminent locale saw a modest contraction in activity in October.
At the same time, building permits, a more forward looking statistic, eased back a bit in October, with such authorizations falling from 890,000 homes annually in September, to 866,000 homes in October. Nevertheless, this was the second highest permit total of the year, and compared quite favorably with last October's rate of 667,000 permits authorized.
Encouragingly, this is the third upbeat housing report in the past two days. Yesterday, for example, we saw the National Association of Realtors report a 2.1% increase in sales of existing homes in October. Expectations there had been for a modest decline. And in another report, U.S. homebuilders were shown to be more optimistic, a sentiment we are now seeing being acted upon. Specifically, a reading of their confidence rose for the seventh consecutive month in November to reach its highest point in more than six years. That issuance was from the National Association of Homebuilders.
Finally, it should be noted that while starts are up 87% from their cyclical trough of 478,000 homes started in April of 2009, the latest total was not only dramatically below the aforementioned 2.3 million early 2006 run rate, but also well under the 1.5 million annual rate of new homes started per year since 1959. Taken as a whole, then, this was a very good report and one that suggests housing is still securely on the mend.
At the time of this article's writing, the author did not have positions in any of the companies mentioned.