Data released today showed that Housing Starts jumped 12.3% in August, to the highest annual rate since 2007. Analysts at Wells Fargo, point out the headline was boosted by a surge in apartments, but noted single-family starts were also strong. They see higher sales and builder optimism points to further improvement.
“Higher builder confidence and an improving trend in single-family permits indicate that new home construction is finally beginning to catch up to the higher pace seen in new home sales. Total housing starts jumped 12.3% to a 1.36 million-unit pace, the highest since June 2007. The headline number surpassed all expectations, but was driven to a large extent by a 32.8% surge in multifamily starts.”
“Single-family starts were quite solid, rising 4.4% to a 919,000-unit pace, the highest since January 2019. Only three times in this long and gradual housing recovery have we seen single-family construction at a higher pace than in August.”
“The National Association of Homebuilders (NAHB) Housing Market Index rose to 68 in September, an 11-month high. The increase was due to an improvement in builders’ assessments of current sales, which have been boosted by the sharp decline in mortgage rates and strong labor market.”
“We might expect stronger builder optimism and construction data given the sharp decline in mortgage rates—the average 30-year conventional mortgage rate has fallen over 130 bps since last November.”
“The Fed will almost certainly announce another rate cut this afternoon, providing further help for builders facing tighter credit recently, and easing some of the supply-side challenges of meeting the higher demand. After being a drag on overall GDP growth for six straight quarters, residential investment is finally poised to boost growth in the third quarter and through next year.”