US: Housing continues to build momentum – Wells Fargo

US Housing data released on Tuesday came in above expectations. Analysts at Wells Fargo point out that the strong numbers back up Monday’s five-point jump in the NAHB index.

Key Quotes: 

“Single-family housing starts rose 2.4% to a 938,000-unit pace in November. Multifamily starts rose 4.9%, and overall building permits rose 1.4%.”

“Homebuilding appears to be gaining momentum, as housing starts handily beat expectations during November and starts for the prior month were revised higher. Overall starts rose 3.2% to a 1.365 million-unit pace, the second strongest since 2007.”

“We expect housing to contribute modestly to fourth quarter GDP growth and offset some of the weakness in capital spending. We have raised our housing outlook for 2020 slightly, and housing is one of the bright spots in our overall 2020 economic outlook.”

“As good as the data have been, overall starts still trail permits by a wide margin. Permits rose 1.4% to a 1.482 million-unit pace, the highest in 12 years. Permits are less volatile and tend to lead starts by a month or two, but a relatively large proportion of homes are started the very same month a permit is issued.”

“Yesterday’s five-point spike in the NAHB/Wells Fargo Housing Market Index to 76 brought it to its highest reading since 1999. Homebuilders are definitely feeling good about the sales environment. The present sales component jumped seven points in November to an astonishing 84 and prospective buyer traffic rose four points to 58. The biggest hurdles for builders are securing affordable well-located lots and construction workers. With interest rates below 4% and the leading edge of Millennials reaching their late thirties, homes are selling quickly. For the first time since the housing bust, homebuilders finally have the wind at their back.”