Last month’s U.S. Department of Housing and Urban Development (HUD) new construction report seemed to suggest that the housing market was finally ready to “collect $200 and pass go” after a topsy-turvy game of gains and losses over the year.
Unfortunately, the November report is a U-turn from October’s historic gains.
According to HUD’s latest numbers, November privately-owned housing permits were at a seasonally adjusted rate of 1,090,000 — an 18.7 percent month-over-month decrease from October, and a 6.9 percent year-over-year decrease from the November 2015 estimate of 1,171,000.
Single-family housing permits were at a rate of 778,000, a 0.5 percent month-over-month increase from October’s revised rate of 774,000.
Construction starts were well below expectations — privately-owned housing starts experienced an 18.7 percent month-over-month and 6.9 percent year-over-year decrease to a seasonally adjusted rate of 1,090,000.
Single-family housing starts collapsed to a rate of 828,000, a 4.1 percent month-over-month decrease from October’s 863,00.
And privately-owned housing completions rose 15.4 percent month-over-month and 25.0 percent year-over-year to a rate of 1,216,000. Single-family completions were at a rate of 774,000 — 3.3 percent above October’s rate of 749,000.
National Association of Realtors Chief Economist Lawrence Yun says the report offers “little to cheer about.”
“The fall in single-family housing starts offers zero relief to the housing inventory shortage throughout the country. Moreover, the collapse in multifamily starts assures continued robust growth in rents next year,” said Yun in a statement.
“Housing costs are rising and this trend will nudge up the broad consumer price inflation enough to surpass 3 percent next year, which is easily above the Federal Reserve’s desired inflation target. The soft housing starts also assures continued sluggish expansion in the overall economy.”
Trulia Chief Economist Ralph McLaughlin offered a more optimistic assessment of the report in a statement, saying “the historical view looks like there’s also more room for housing starts to grow.
“Though November’s drop is disappointing news for the housing market, we’re confident that housing starts will continue their slow and steady rise through 2017 and beyond,” said McLaughlin.
“Yesterday’s large jump in homebuilder sentiment is a good sign that they think so, too. More starts in 2017 will be welcome news for homebuyers who have been stymied by a supply-constrained market over the past few years.”
The metrics in the New Residential Construction report measure new, privately owned housing units, excluding manufactured (mobile) homes. The U.S. Census Bureau and HUD collect the data from the Building Permits Survey and from the Survey of Construction, which is partially funded by HUD.
The Building Permits Survey produces estimates of the number of permits issued for new housing units based on a mail survey of a sample of permit offices. The Survey of Construction produces monthly estimates of housing starts and completions; Census Bureau field representatives sample individual permits within a sample of permit offices and then interview the builders or owners who took out the sampled permits to obtain start and completion date, as well as sale dates and characteristics, such as size and number of bedrooms.
Field representatives also drive roads looking for new residential construction activity in land areas where building permits are not required.