Housing Starts Declined 1.6% in November
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Implications: Another Plow Horse report on housing. Housing starts fell 1.6% in November but exceeded the 1 million pace for the third consecutive month, the first time since 2008. November's drop of 1.6% for home building was all due to single-family units, which were down 5.4% in November. To smooth out the monthly volatility we look at the 12-month moving average for overall housing starts, which besides last month, is at the highest level since September 2008. The underlying trend remains upward and we expect that to continue. The total number of homes under construction, (started, but not yet finished) increased 1.2% in November and are up 18.3% versus a year ago. No wonder residential construction jobs are up 123,000 in the past year. Multi-family construction rose 6.7% in November and has taken the clear lead in the housing recovery. Single-family starts have been in a tight range for the past two years, while the trend in multi-family units has been up steeply. In the past year, 35% of all housing starts have been for multi-unit buildings, the most since the mid-1980s, when the last wave of Baby Boomers was leaving college. From a direct GDP perspective, the construction of multi-family homes adds less, per unit, to the economy than single-family homes. However, home building is still a positive for real GDP growth and we expect that trend to continue. Based on population growth and "scrappage," housing starts will rise to about 1.5 million units per year over the next couple of years. In other housing news, yesterday, the NAHB index, which measures confidence among home builders, declined to 57 in December from 58 in November. Readings greater than 50 mean more respondents said conditions were good. Expect more Plow Horse-like gains in housing in the year ahead.

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Posted on Tuesday, December 16, 2014 @ 11:51 AM

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