News & Opinions
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Our Take on the Housing Starts Report
Jonathan Smoke and Brad Hunter / Metrostudy / December 18, 2013
From Hanley Wood’s Chief Economist, Jonathan Smoke:
Today new housing starts were released by the U.S Department of Commerce for September through November following the delay in data releases created by the October shutdown. Following the last revision of August housing starts at a seasonally adjusted annual rate of 883,000, there was a slight decline seen in September of 1% but starts have since been on the rise for the two most recent months. October starts showed a modest increase over September to reach 889,000 starts while November saw significant gains with starts over one million for the first time since March 2013. At 1,091,000, the annual rate for November starts was also noteworthy as the highest seen since February 2008 and boasts such growth as a 23% jump over October and 30% rise over November of last year.
The non-seasonally adjusted rate also shows a strong November, with starts up 7% over October and, most significantly, a year over year increase of 33%. With this recent growth over prior months, new housing starts look poised to continue the trend and our forecasted starts of 1,134,000 for 2014 is right on target.
From Metrostudy’s Chief Economist, Brad Hunter:
The government’s numbers showed a huge increase in housing starts this morning. This is consistent with the findings of our local research, as well as the findings of our site-specific market studies around the country. Total starts once again pierced the 1 million level, which is a significant milestone. It indicates that builders are finding enough lots to continue to grow their operations (though they are paying high prices).
Single-family starts rose 20.8% sequentially, compared with the previous month, as well as 26.2% compared with 12 months ago. This brings the single-family activity to 727,000, the highest level in 5 years! I am not surprised to see the uptick in the government’s number, because we have been seeing strength in our own starts numbers all year. Even with the “pause” in home sales, our data on housing starts have shown a continued upward trend. Putting this number in context, builders have recently experienced a slower pace of sales, but our expectation is that new home sales will revive in the next six months. Builders appear to be hopeful as well.
Metrostudy’s proprietary data show that Nashville land markets are extremely active lately. In general, we are finding that 2nd tier markets are now recovering faster than many 1st tier markets.
This number supports our forecast of a 20%-plus increase in starts in 2014. Builders need to open more “stores,” and they will continue to be driven by this need next year.
Here are some of our tweets on the topic as the news unfolded: