- Housing starts were up a better-than-expected 1.9% in October, though still down 4.2% from last year.
- Building permits rose 1.1% and single-family building permits moved higher for the ninth straight month.
- Economists saw the data as signs that builders are confident they can sell houses, even if economic conditions worsen, as long as mortgage rates continue to trend lower.
Housing starts and building permits in October came in above expectations, a signal that builders are starting to feel a little more optimistic about the economy.
Housing starts were occurring at an annual rate of 1.37 million in October 2023, more than the 1.35 million that analysts were expecting, and 1.9% above the September rate of 1.35 million, which was revised marginally lower, according to data from the U.S. Census bureau. Housing starts were still 4.2% lower than they were in October 2022.
“With so much concern over the resiliency of the all-important consumer, today's reports suggest that builders do not expect an impending recession,” said Quincy Krosby, chief global strategist at LPL Financial. “Moreover, builders undoubtedly perceive there's a viable market for new housing and that they can sell the houses fairly quickly without inventory building if there's a recession.”
Building permits, which can act as an indicator for future housing starts, came in at an annual rate of 1.49 million, 1.1% above the September rate of 1.47 million. Single-family building permits were at a rate of 968,000, a 0.5% increase over September’s level. It was the ninth consecutive month that single-family permits moved higher, according to Robert Frick, corporate economist with Navy Federal Credit Union.
“The problem is single-family building remains low by historical measures, mainly caused by high mortgage rates depressing demand,” Frick said. “We need building 50% higher to put a good dent in our housing deficit, and that won’t happen until rates drop significantly."?
A drop in mortgage rates may be on the horizon, with the National Association of Homebuilders observing this week that conditions were right for mortgage rates to drop, stepping back from recent 22-year highs as mortgage rates eclipsed 8%. Because of that, the NAHB is forecasting a 5% increase for single-family starts in 2024.