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Starts miss expectations, but uptrend remains intact

Housing Starts – February 2018

Housing starts came in below expectations falling 7.0% M/M to 1.236 million on an annualized basis.

Starts are in a steady upward trend. The data is quite choppy and best viewed as a moving average to smooth out volatility. LendingTree prefers the 3-month average to balance timeliness with information value. The 3-month average of single-family starts of 875,000 is at its weakest level since October 2017, but we believe the uptrend remains intact. The multi-family 3-month average is recovering having sunk to a 4-year low in September.
Growth is being driven by tight inventory. Inventories are constrained in both the new home and existing markets. 3-month average single-family building permits were the highest since 2007 as builders respond to the high demand. Builder confidence is high and construction jobs are increasing, all encouraging signs.
Great start to 2018 after strong 2017. 2017 was the strongest year for homebuilding since 2007. The tax plan will also increase builder margins by 10-15%, encouraging more activity including at the lower end which has been underserved in the recovery.

 

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