Quiver Quantitative - U.S. single-family homebuilding experienced a significant surge in November, reaching its highest level in over one and a half years, as reported by the Commerce Department. This increase is primarily attributed to falling mortgage rates and incentives from builders, which are drawing potential buyers back into the housing market. The report also indicated an increase in permits for future single-family housing construction, hitting the highest level since May 2022. Despite challenges from rising mortgage rates earlier in the year, the market remains buoyed by a severe shortage of pre-owned homes available for sale.
The jump in single-family housing starts was notable, rising 18.0% to a seasonally adjusted annual rate of 1.143 million units, the highest since April 2022. This rebound was likely aided by favorable weather conditions and is seen as a positive sign for the U.S. economy, potentially helping it to avoid a recession in the coming year. Economists, including Bill Adams of Comerica (NYSE:CMA) Bank, anticipate that the housing market will fuel economic growth as long-term interest rates fall and builders respond to increased housing demand.
Market Overview:
- U.S. stocks climbed on the back of upbeat housing data and optimism surrounding a potential Fed pivot towards looser monetary policy.
- The dollar weakened on expectations of declining borrowing costs, while Treasury prices rose as investors sought safer havens amid ongoing recessionary concerns.
Key Points:
- Single-family housing starts soared 18% in November, hitting 17-month high and exceeding analyst forecasts.
- Falling mortgage rates, mild weather, and a tight existing home market fueled the construction upswing.
- Building permits for future single-family homes also jumped, reaching their highest level in 1.5 years, hinting at sustained momentum.
Looking Ahead:
- Economists revised their GDP growth estimates for the fourth quarter upwards, with the housing market seen as a crucial factor mitigating recessionary risks.
- The Fed's next policy decision, along with any further shifts in mortgage rates, will be closely monitored for their impact on the housing sector.
- Balancing supply and demand in both single-family and multi-family segments will be essential for ensuring sustainable growth and improving affordability.
The favorable shift in the housing market is partly due to the recent decrease in mortgage rates. The rate for the popular 30-year fixed mortgage fell to its lowest level since August, encouraging more construction and homebuying activities. Additionally, the Federal Reserve's recent indications of an end to the tightening of monetary policy and the prospect of lower borrowing costs in 2024 have further stimulated the housing sector. The National Association of Home Builders also reported a rebound in builder confidence, despite ongoing challenges.
In a broader context, the overall housing market has shown promising signs. While permits for future construction of single-family homes increased, multi-family building permits saw a decline. Despite this, overall housing starts soared by 14.8%, surpassing economists' forecasts. The report suggests that the drag on GDP from the residential investment sector is diminishing, and efforts to balance supply and demand, as well as improve affordability, are underway. This positive momentum in the housing market is a key factor in the current economic landscape and is closely watched by policymakers and investors alike.
This article was originally published on Quiver Quantitative