Data released today showed that housing starts dropped 5.3% to 1.201 million in September in the US. Most of the weakness occurred in the South, likely a result of Hurricane Florence point out analysts at Wells Fargo. Despite today’s data, they see that builder confidence edged up in October and remains elevated.
Key Quotes:
“Total housing starts came in slightly below expectations and declined 5.3% in September. Much of the decline occurred in volatile multifamily starts, which dropped 12.9%.”
“Building permits also saw a slight 0.6% decline. Despite the lackluster string of recent data on new residential construction, starts continue to slowly trend higher and are now up 6.4% year-to-date.”
“Some of the weakness may be owed to Hurricane Florence, which hit the Carolinas in mid-September.”
“Despite an overall sluggish pace of housing activity, builder confidence remains high. The NAHB Housing Market Index increased one point to 68 in October, as builders continued to report solid housing demand.”
“Housing is unlikely to make a significant breakout to the upside at this point in the business cycle. Higher mortgage rates and steadily rising home prices have significantly reduced affordability. Rising costs have made it more difficult to build homes at lower price points where demand is strongest.”
“Builders continue to express a great deal of optimism about current conditions. Builders may also be getting some relief from higher materials prices, as lumber prices have fallen from the highs hit earlier this summer. Given that demand also appears to be holding its own, we expect activity to gradually improve in coming months.”
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