January 19, 2022 | 08:52
No Way Home? Builders Are Working On It!
Please sir, may I build some more?
U.S. housing starts unexpectedly rose in December for the third consecutive month. Starts were up 1.4% to 1.702 mln units annualized, the highest since March. Milder temps helped. And, this follows a downwardly revised November (was +11.8%; now, +8.1%) and a big upward revision to October (was -3.1%; now, +0.1%). Indeed, revisions certainly change the story sometimes.
The story for December was a bit mixed.... singles (which make up 70% of the total), fell back 2.3% while multis jumped 10.6%. Regionally, gains in the NE and the MW managed to overcome declines in the all-important South and the West.
But not to fear .... lots of ground yet to be broken. Building permits (after all, one needs to ask permission before building) surged 9.1% in the month to 1.873 mln units, the highest since the start of the year, and for both singles and multis. The regional breakdown was similar to starts, led by a surge in the NE, where permits more than doubled. Look for a big decline to follow in January.
So what is going on here? Still-strong demand for homes, particularly with buyers getting in before rates really start to climb. Builders are gladly trying to meet demand, but supply problems and labor shortages are slowing them down. And softwood lumber duties are going to hurt this spring. That is the likely story behind the latest confidence survey. Homebuilder sentiment faltered a bit in January (-1 pt to 83), though it remains elevated (see Chart below).
Bottom Line: Permits > Starts