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By New_Deal_democrat November 20, 2017 11:13 am
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October housing permits and starts indicatte slowdown ending

Last week's report on housing permits and starts was big news, because housing finally broke out to new highs, surpassing last winter's numbers, after a slowdown for 9 months. 



Let me tick off the highlights first: 

  • single family permits made a new expansion high
  • single family starts made a new expansion high
  • total permits were just shy of their expansion high from last winter
  • the three month moving average of total starts, which smooths out volatility, made a new expansion high
  • the number of units for which a permit has been issued, but which have not yet been started, made a new expansion high

 

Let's take a more in-depth look, starting with permits. Because the hurricanes affected building in the South Census Region, in the following graphs I've compared nationwide numbers (blue) with numbers excluding the South.



First, here are overall permits:







Nationwide they were just below setting a new record, but surprisingly, excluding the South, they did set a new high for the expansion.



Since single family permits are less volatile, but just as reliable, let's take a look at those:







Nationwide these backed off a new high they set month ago.  Excluding the South, they are still behind their high set last winter.



The more volatile housing starts did not set new expansion highs, either nationally or excluding the South:







But one unusual factor I've mentioned over the last several months is that there is a big backlog of permitted units that have not yet been started, and that continued in October:







So this was a very strong report, and that's even before the YoY interest rate story turns more favorable.  The one negative that still exists is that permits tend to lag changes in interest rates by about 6 to 9 months, and here, the last year saw a negative comparison of interest rates:







Thus I would expect limited upside on a YoY basis for the next 6 months.



Fundamentally higher prices should be biting into demand, and the significant increase in median household income of 2015 and 2016 is behind us, but so far, the tailwind from demographics, which overcame even a bigger interest rate spike in 2014, are winning.

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