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Brian Wesbury
Chief Economist
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Bob Stein
Deputy Chief Economist
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 | Housing Starts Rose 3.6% in October to 894,000 Units at an Annual Rate |
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| Posted Under: Data Watch • Home Starts • Housing |
Implications: Housing starts increased to an 894,000 annual pace in October, crushing consensus expectations and beating the prediction of every single economic forecaster. The consensus expected drop had much to do with Hurricane Sandy affecting the Northeast. Looking at the data, the storm did drive down activity in the area, but the West and Midwest had strong gains in building activity, easily offsetting the loss in the Northeast. Housing starts are up 41.9% from a year ago and builders are now starting homes at the fastest pace since July 2008. All of the gain this month was due to the volatile multi-family sector. Even so, the charts to the right show, both single-family and multi-family starts and permits are trending higher. The total number of homes under construction (started, but not yet finished) are up 22% from a year ago and increased for the 14th straight month, the first time this has happened since back in 1997-98. Based on population growth and "scrappage," housing starts will eventually rise to about 1.5 million units per year (probably by 2015), which means the recovery in home building is still young. That may seem like a big leap over the next few years, but a gain of 20% per year for the next three years gets us up to that level. And that pace of increase is half as large as the gains over the past twelve months. Don't expect a straight line recovery, there will be zigs and zags along the way, but the overall trend will continue higher.
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These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
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