Housing starts rose 3.3% in November according to data released this morning, offsetting a -2.6% revision to the previously announced October level. Within total housing starts, single-family starts are more closely followed, and here the news was uniformly positive, with a 5.3% increase announced for November on top of a +0.7% revision to October.
The better housing construction data followed a positive retail sales number announced last week. We have been more nonplussed by the last few months’ data than most of our colleagues, in that we thought October and November gains in jobs, orders, production, etc. were overstated by a recovery from the hurricane-depressed data levels for August and September. However, even we had to admit that last week’s retail sales news was good any way you sliced it.
For today’s housing data, while we would still assert the presence of some hurricane after-effects, there has been more net improvement lately than the hurricanes alone can explain. The accompanying chart illustrates this point.
The chart compares levels of single-family permits, starts, and (new-home) sales, as we have done in past months’ By The Numbers. The idea is to average out data depressed by the onset of the hurricanes with data possibly overstated by hurricane after-effects, then see what the progress is on average.
For new-home sales, average levels over the past four months are right in line with previous levels (orange line versus red). In other words, as strong as October new-home sales were, they only served to offset previous sales levels depressed by the hurricanes. For single-family housing starts, however, the average of the last three months is a bit above what we saw earlier in the year (purple line versus blue).
So, even allowing for some snapback after the hurricanes, housing starts still show net upward progress. The question is whether this net progress is for real or just a random fluctuation. As always, the answer is that we’ll find out when the next few months’ data roll in. We are somewhat skeptical of the contention that home construction is suddenly perking up after a year of flat behavior, but, again, the last few months’ starts data are a bit stronger than what our hurricane after-effects theory would easily explain.
This marks our last By the Numbers for the year. We want to wish you all Happy Holidays. Thank you very much for faithfully following these missives during 2017.