Construction Activity Edges Up in November on Multi-Family Strength

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • Home building activity, measured by housing permits and starts IMPROVED in November, led by multi-family activity;
  • The seasonally adjusted annual rate of multi-family starts ROSE 21.7 percent while single-family starts FELL 4.6 percent;
  • Permit activity followed the same pattern: permits for single-family homes inched up 0.1 percent while permits for multi-family housing ROSE 14.8 percent; combi9ned, permits were up 5.0 percent;
  • The rate of housing completions though ROSE 0.4 percent, though single-family completions FELL 5.4 percent from October while multi-family completions ROSE 17.2 percent.

Trends:

  • The month-month increase in total permits was the strongest since October 2017;
  • The increase in the pace of multi-family permits was the strongest since March;
  • Single-family starts fell to the lowest level since May 2017.

Data Source: Census Bureau and Department of Housing and Urban Development 

Image result for housing permits and starts

Census Bureau data on housing permits and starts provided the appropriate backdrop to Monday’ report the Housing Market Index (aka builder confidence index) tumbled for the second straight month, down to 56 (out of 100), a drop of 12 points or almost 18 percent in the last two months.

The National Association of Home Builders, which compiles the index, attributed the decline to concerns over affordability though prices for lumber – a major component of home building – are near their lowest levels of the year.

The Housing Market Index, NAHB’s yardstick for builder confidence fell to 56, the weakest since May 2015 but still in positive territory. Any reading above 50 is seen as noting confidence.

The NAHB has, in the past few months, excoriated the Administration’s new tariff proposals which affect, among things, lumber prices. At the time the tariffs were announced, the NAHB warned the higher duties “could have major ramifications for the housing industry. With housing costs on the rise, this action translates into a tax increase on housing that will rise even more significantly on Jan. 1 when the tariff rate jumps to 25 percent.”

The tariffs the NAHB came “on top of the current 20 percent tariffs on softwood lumber imports from Canada. The lumber tariffs have already added thousands of dollars to the price of a typical single-family home.”

Permits and starts were especially hard hit in the West, the scene of devastating forest firms. Permits rose 1.6 percent from October, but year-year are off 11 percent in the region. November starts in the West were down 14.2 percent from October and off 18.4 percent from November 2017,

Hear Mark Lieberman every Friday at 6:20 am on POTUS Morning Briefing, Sirius-XM 124. You can follow him on Twitter at @foxeconomics.

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