Housing Starts and Building Permits for November both surprised to the upside today, which should help to further justify a rate hike following this afternoon’s FOMC meeting. As shown in the table to the right, Housing Starts came in at a seasonally adjusted annualized rate (SAAR) of 1.173 mln versus estimates of a gain of 1.130 mln. Permits were even stronger, exceeding expectations by 139K (1.289 mln vs 1.150 mln). For permits, today’s report was the strongest relative to expectations in nearly a decade (February 2006).
The table to the right shows the breakdown of today’s report for both Housing Starts and Building Permits. As shown, both the headline starts and permits readings increased by more than 10%. One potential negative of the report was that for both reports we saw stronger growth in multi-family units over single family units. For permits, practically all of the growth was in multi-family units.
Even before the report was released, weather was cited as a potential driver of strength in the report. Certainly, the much warmer than expected weather couldn’t have hurt, but if you look at the regional breakdown of today’s report, Housing Starts in the Northeast actually declined 8.5% while Building Permits in the region were flat. The strongest region of growth for both reports was actually in the South, which should see less of a weather-related impact.
The charts below show the historical monthly readings in Housing Starts (left side) and Building Permits (right side) leading up to and after the last recession. Overall, both headline readings are slightly below their cycle highs. Housing Starts are still 38K below their June 2015 high of 1.211 mln, while Building Permits are 48K below their high of 1.337 mln from the same month.
Above we mentioned that much of the growth in starts and permits this month was the result of multi-family units. Despite that, single family units did increase for both reports, taking both to cycle highs. The last time Housing Starts were this high was in January 2008. Building Permits haven’t been this high since December 2007.