Housing starts took a nose-dive in November as they dropped from October’s 10-year high, according to the new report from the U.S. Census Bureau and the Department of Housing and Urban Development.
Privately owned housing starts decreased 18.7% in November to 1.09 million, down from 1.34 million in October. This is down 6.9% from last year’s 1.17 million.
Of those, single-family housing starts totaled 828,000, a drop of 4.1% from October’s 863,000.
However, one expert pointed out that while the sudden drop was due to last month’s high in part, there were still other factors.
“Housing starts dropped in November, and the drop was due to more than October’s big increase,” Trulia Chief Economist Ralph McLaughlin said. “For context, housing starts in November were the second lowest since October of last year.”
“While starts fell in November, they continue to provide an important release valve for solid demand in the housing market, but still have much more room for growth,” McLaughlin said. “Starts in November were only 55% of their long-run average, but year-to-date they are up 4.8%.”
McLaughlin stated that he expected housing starts to increase throughout 2017, but not everyone was so positive. In fact, one expert said this is not only bad news for housing, but also for the economy overall.
“There’s little to cheer about regarding residential construction in November,” said Lawrence Yun, chief economist for the National Association of Realtors. “The fall in single-family housing starts offers zero relief to the housing inventory shortage throughout the country.”
“Moreover, the collapse in multifamily starts assures continued robust growth in rents next year,” Yun said. “Housing costs are rising and this trend will nudge up the broad consumer price inflation enough to surpass 3% next year, which is easily above the Federal Reserve’s desired inflation target. The soft housing starts also assures continued sluggish expansion in the overall economy.”
Privately owned housing units authorized by building permits also dropped by 4.7% from October’s 1.26 million to 1.2 million in November. This is also down 6.6% from last year’s 1.29 million.
Of those, single-family authorizations in November increased slightly by 0.5% from October’s 774,000 to this month’s 778,000.
The slight rise in building authorizations was enough to give one expert hope that new home construction could see an increase.
“This month’s report is a prime example of the volatile nature of this data,” Quicken Loans Vice President Bill Banfield said. “Looking at the big picture we have seen improvement, albeit choppy.”
“While demand continues to rise, a recent surge in home builder sentiment coupled with a rise in single family permits are encouraging steps forward to help ease the shortage for housing,” Banfield said.
Contrary to housing starts, privately owned housing completions increased in November to 1.22 million. This is up 15.4% from October’s 1.05 million and up 25% from last year’s 973,000.