Implications: Following a similarly healthy report in October, housing starts continued to surpass expectations in November. The key driver of the 2019 recovery in home building continues to be single-family starts, which have been on a general upward trend since bottoming in February and are within spitting distance of new highs. Meanwhile, the three-month average of single-family starts hit a post-recession high in November. Conversely, multi-family starts have been range bound since 2015 when an upward trend ended. On average, each single-family home contributes to GDP about twice the amount of a multi-family unit, so a growing share of single-family construction will be a boon for economic growth. And with total permits, and permits for single-family construction, both rising to post-recession highs, builders are clearly becoming more optimistic about future prospects following an all-around tepid year for housing in 2018. This higher sentiment among builders was reflected in yesterday's release of the NAHB index, which rose to a twenty-year high of 76 in December from 71 in November. It's not hard to see why builders expect continued strength in the housing market. Mortgage rates have dropped roughly 110 basis points since the peak late last year while wages are now growing near the fastest pace in a decade, boosting affordability. Our outlook on housing hasn't changed: we continue to anticipate a rising trend in home building in the next few years. Based on fundamentals – population growth and scrappage – the US needs about 1.5 million new housing units per year but hasn't built at that pace since 2006.
Click here for PDF version