No surprise that housing starts are down as interest rates are up, however builders are completing existing orders.
Data out this morning tells a familiar story about the current state of the housing market. Demand for new homes has plummeted, so homebuilders are breaking ground on fewer of them.
- But there is still decent news on housing supply: Builders continue to complete homes in their massive backlog at a rapid rate — an inventory boost that could also help bring down prices.
What they’re saying: “A huge wave of residential units under construction built up during the supply chain turmoil of the last few years, and it is going to wash over the housing market in 2023,” Bill Adams, Comerica Bank’s chief economist, wrote in a note.
- “The turn in the housing market is bad news for GDP, but good news for inflation.”
By the numbers: Last month, homes completed rose to an annualized 1.5 million, a 15-year high. In fact, homebuilders finished homes faster than they broke ground on new ones.
- A huge drop-off in single-family units pushed overall housing starts down.
- Construction of single-family homes dropped to an annualized 828,000 rate, the lowest since the early days of the pandemic and down more than 30% from last year.
Where it stands: Mortgage rates have fallen from the highest levels of the year, but they remain twice as high as they were last year. Builders have struggled with sky-high costs for materials and labor, and shortages of both have slowed their ability to finish homes. But there are some signs those troubles are receding.Axios Macro By Neil Irwin and Courtenay Brown · Dec 20, 2022
“Housing starts surprised on the upside in November, but permits plunged to the lowest level since June 2020,” Jefferies economists Aneta Markowska and Thomas Simons said in a note Tuesday. “Permits are now running below starts which is very rare and suggests construction pipelines are drying up very fast, creating further downside for activity.”
Housing is the largest component in services price pressures and broadly makes up roughly a third of the overall inflation index, according to a note from Stifel Tuesday.
“Without a meaningful retreat in housing prices, along with a broader decline in headline inflation, the Federal Reserve will find it increasingly difficult to move away from its newly affirmed hawkish position and commitment to reinstating price stability as we head further into 2023,” Stifel Chief Economist Lindsey Piegza said in the note.Building Permits Sinking to Two-And-a-Half-Year Low Accompanies Move Higher in US Equities MT Newswires