Single-family starts rise to 10-year high
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Housing starts came in above expectations rising 3.3% M/M to 1.297 million on an annualized basis.
- Single-family starts are at the highest level since the financial crisis. 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 882,000 is at its highest level since the financial crisis, matching November 2007. The multi-family 3-month average is recovering having sunk to a 4-year low in September.
- Growth is being driven by tight single family inventory. The construction market is rotating into single-family as tight inventory boosts the segment while rising rental vacancies and slowing rental inflation reduce the incentives for multi-family developers.
- 2018 should see further improvement. An 18-year high reading for homebuilders confidence suggests starts will continue to advance in 2018. The tax plan will also increase builder margins, encouraging more activity including at the lower end which has been underserved in the recovery. While the strengthening of single-family starts is encouraging, new construction remains subdued relative to the size of the population indicating room for further gains.