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Housing starts for November came in slightly ahead of expectations at 1,256,000 units compared to a consensus number of 1,225,000. Permits also fared well relative to expectations, coming in at 1,328,000, 5.8% above the consensus number of 1,255,000. On a year over year basis, starts fell 3.6% against a strong November 2017 result, while permits were essentially flat.
Today’s positive surprise comes on the heels of yesterday’s release of the homebuilder sentiment index, which dropped to 56, its lowest level since May 2015. The drop seemingly reflects builders’ continued concern over affordability challenges driven by costs for land, labor and materials, along with mortgage rates above recent historical lows that may be keeping potential buyers on the sidelines. Yesterday’s release highlighted that builders are struggling to meet the demand of affordably priced single family homes at the entry level price point. If we delve into the November numbers a bit further, the results seem to back this up, with the strength in both starts and permits being driven by the multi-family segment. Compared to November of last year, single family permits fell 1.8% and single family starts fell 13%, while multi-family permits rose 5.6% and multi-family starts rose a robust 20%.
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