The Monthly New Residential Construction Report is released jointly by the Census Bureau and the Department of Housing and Urban Development and covers privately owned housing authorised by building permits and housing starts.
The above shows the chart for building permits, which fell from 1.498mn to 1.460mn for November, representing a drop of 38,000 permits and below economist expectations of 1.470mn. With that said, single-family home authorisations increased 0.7% to 976,000 from 969,0000, indicating that the dry-up in housing inventories may be impacting permit applications.
Opposed to building permits, Housing Starts (shown in the chart above) increased 14.79% MoM in November, representing an increase of 201k applications, bringing the number of housing starts to 1.56mn. Additionally, this figure was far higher than the economists' expectations of 1.360mn which predicted the figure would stay flat between October and November. The rise suggests that incentives for building housing are rising, such as increasing home prices given the
dry-up in housing inventories.
Going forth, I would expect to see both building permits and housing completions increase, in line with their wider trends. Although interest rates are weighing on building costs, I believe that the profit of building a home has outpaced the cost of doing so as people are no longer willing to sell their homes given remortgage risk and therefore, pushing up home prices making it more appealing to home builders. With that said, once interest rates start to fall, I would expect demand for new homes to fall as existing homes flood the market. This would consequently cause building permits, housing starts and building completions to drop.
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