US Housing Starts Surge to Impressive Levels since May 2023

In a remarkable turn of events, there was a US housing starts surge, marking a significant upswing in the construction sector. November 2023 saw a 14.8% leap in new home constructions, catapulting the rate to a striking 1.56 million annual pace. This surge, not seen since May 2023, indicates a robust demand in the housing market, albeit still shy of the April 2022 peak of 1.8 million.

US Housing Starts Surge: November sees a significant 14.8% increase in construction, reaching a 1.56 million annual pace.

Reasons for the US Housing Starts Surge

The impetus behind this surge is clear. As Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets, puts it, “Housing starts exploded higher in November, surging by nearly 15% to a 1.56 million unit annualized pace, the best reading since May and second-best in a year and a half.” This dramatic increase is primarily due to a strong home-buying demand amidst a notable shortage of available homes. The rate comfortably surpassed Wall Street predictions of a 1.36 million rate, underscoring a market more robust than anticipated.

The US housing starts surge in November was driven by strong home-buying demand and a shortage of available homes, exceeding Wall Street's expectations. — The US housing starts surge in November was driven by strong home-buying demand and a shortage of available homes, exceeding Wall Street’s expectations.

Type of Construction and Geographical Variation

Both single-family and multi-family constructions witnessed growth in November. Single-family home constructions rose by 18%, while apartment building increased by 8.9%. Geographically, the Northeast experienced a substantial boom, doubling its construction output. However, single-family starts in the West saw a marginal decline of 0.8%.

In November, construction of both single-family and multi-family homes increased, with a notable boom in the Northeast and a slight decline in the West.

Building Permits and Market Context

Building permits, which indicate future construction trends, fell 2.5% to a 1.46 million rate. Despite this, single-family home permits saw a slight increase. This current market context reflects a response to the strong buyer demand and a recent dip in mortgage rates. The 30-year mortgage rate fell below 7% for the first time since August, hinting at more affordable home loans.

Building permits for future construction decreased overall, but increased for single-family homes, reflecting strong buyer demand and lower mortgage rates.

Economists’ Perspectives

Economists have varying views on this trend. While Stanley sees the surge as a significant increase driven by lower mortgage rates and a low supply of existing homes, Ali Jaffery from CIBC Economics offers a cautious tone. He remarks, “While mortgage rates have eased substantially since their peak in late October, today’s release likely reflects noise rather than the influence of gradually improving demand. We expect a pullback next month.” This mix of optimism and caution paints a complex picture of the housing market’s future.

Market Reaction

Following this announcement, U.S. stocks showed an uptick, and the yield on the 10-year Treasury note remained below 4%. This positive market reaction indicates a broader confidence in the economic stability and growth potential of the housing sector.

New home construction jumps, raising hopes for better housing market Census Bureau data for showed the pace of starting new homes ramped up more than expected in November.

Increase in US Home Construction

Recently, there’s been an increase in US home construction. The Census Bureau shared some news that in November of 2023, the number of new homes starting to be built (called “housing starts”) went up a lot. Click to read more.

Conclusion

The US housing starts surge in November is a beacon of optimism in the construction industry. It represents a significant increase in housing starts, a response to strong buyer demand and falling mortgage rates. However, the caution expressed by some economists suggests that this might be a temporary spike. Regardless, this development holds substantial implications for the housing market and the broader economy.