Housing Starts Declined 3.6% in January

 

Implications:  Great news on the housing market in January.  Although housing starts fell versus December, they came in substantially higher than the consensus expected.  In fact, with the exception of the massive surge in December, the 1.567 million annualized pace of starts in January was the highest since 2006.  The recent strength in housing starts is in part due to unusually mild weather through much of the country so far this winter.  However, it's not just about the weather.  Building permits jumped 9.2% in January and hit the highest level since 2007, a good sign for construction later in 2020.  We think home building will remain on the upward trend it's been in since 2011.  Based, on fundamentals (population growth and scrappage) the US needs to start about 1.5 million homes each year, a level that was only recently hit in December 2019.  Given how long it's taken to get back to that level, there's also some room for overshooting to make up for lost time.  In other recent housing news, the NAHB index, which measures sentiment among homebuilders fell one point to 74 in February from 75 in January, remaining just below the 20-year high of 76 set in December 2019.  It's not hard to see why builders remain optimistic about the housing market.  Mortgage rates have dropped roughly 110 basis points since the peak in late 2018 while wages continue to grow at a healthy pace, boosting affordability.  Our outlook on housing hasn't changed: we continue to anticipate a rising trend in home building in the next few years.

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Posted on Wednesday, February 19, 2020 @ 11:31 AM

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.