'Renter-Nation' Rout Looms? Powell Pivot Prompts Plunge In Multi-Fam Permits
Despite a small bounce in homebuilder sentiment (and a tumble in mortgage rates), analysts expected housing starts and building permits to decline MoM in November (after unexpectedly rising last month).
But the picture was very different - Housing Starts exploded 14.8% MoM (-0.2% exp) with only a small downward adjustment in October (from +1.9% MoM to +0.2% MoM). That is the third monthly gain in a row.
Building Permits fell slightly more than expected (-2.5% MoM vs -2.2% MoM exp) and an upward revision in Octobe from +1.1% to +1.8% MoM.
Source: Bloomberg
On a SAAR basis, Housing Starts are near their highest since May 2022, while building permits are at their lowest since July...
Source: Bloomberg
Under the hood, the surge was all in single-family starts which soared 18% MoM. Single-family permits rose MoM for the 11th month in a row...
Source: Bloomberg
2023 has been the year to end 'Renter Nation' as single-family starts have soared while multi-family unit starts have tumbled...
Source: Bloomberg
Source: Bloomberg
Mortgage rates are down 100bps from their highs at the end of October, but it seems while homebuilders are starting homes at a furious pace (despite sentiment being low still)...
Source: Bloomberg
...the more forward-looking permits refuse to buy what The Fed is selling...
Source: Bloomberg
But, despite the drop in mortgage rates, there is still a massive gap between current and effective rates held by Americans...
Source: Bloomberg
Oddly, despite the regime shift lower in housing starts and completions, construction jobs (according to the BLS) are hitting new cycle highs...
Source: Bloomberg
More supply is good - no doubt - but we can't help but feel like Powell's latest pivot will simply create the next mega-bubble in single-family real estate... again! And worse still, send the 'shelter' aspect of CPI soaring once again.
