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Housing starts for October came in 3.2% below expectations at 1,228,000, a 2.9% drop from October of last year. While starts increased slightly from September’s revised number of 1,210,000 the gains were driven by the multi-family segment’s 6.2% month-over-month gain to 343,000. Isolating the important single family segment shows a decrease of 1.8% to 865,000 from September’s revised 881,000.
This month’s results continue a lackluster five-month trend for both starts and permits. It was a bit of an anomaly that monthly builder sentiment trended so positively relative to starts and permits between June and September, but yesterday’s drop in the index from 68 to 60, the largest monthly drop since February of 2014, seems to be more reflective of the current environment. While a reading above 50 is still positive, the significant drop reflects a rapidly changing demand environment as voiced by multiple builders during recent quarterly earnings calls. A recurring theme is that rising interest rates and rising home prices are creating affordability challenges that are causing buyers to take pause and re-assess their situation. With the fed signaling continued rate increases and minimal price relief in sight, this ho-hum trend appears likely to continue.