Permits Continue to Gain, Starts Stalled in November
- Housing Starts for November decreased by 3.0 percent to an 861,000 unit annual rate.
- Permits for new residential construction continued to increase in November, up 3.6 percent to 899,000.
- Mortgage Applications for the week ending December 14 fell by 12.3 percent.
Housing remains a positive force in the U.S. economy heading into year end. It will most likely continue to be a positive force in 2013. However, it is not a juggernaut impervious to the fiscal minefield currently being negotiated on Capitol Hill. If there is a reasonable workout of the Fiscal Cliff that does not severely drag down real disposable incomes at the same time that major spending cuts are initiated, job creation remains at least moderate, and consumer confidence does not deteriorate, then housing can continue to be an engine of growth. Housing affordability remains historically high, aided by low but rising prices and very low mortgage rates. Pent-up demand for housing is ample, to say the least. Credit availability is improving. Home construction eased in November after a surge in September and October. Housing starts fell 3.0 percent in November down to an 861,000 unit pace. Hurricane Sandy may have been a factor in the Northeast, where starts were down 5.1 percent, but starts were also down in the West by 19.2 percent. The Midwest gained 3.3 percent and the South was up 2.9 percent for the month. Given the surge in starts from a 750,000 unit pace in August, up to 888,000 in October, it would not have been a surprise to see an adjustment even without Hurricane Sandy. Permits numbers say all systems are go right now for more construction. Permits for new construction increased by 3.6 in November to an 899,000 unit rate. Permits for single-family construction were flat for the month, but multifamily saw gains. Completions fell for the month, down 9.7 percent to a 677,000 unit pace after a relatively strong month in October.
Applications for mortgages fell by 12.3 percent for the week ending December 14. This series can bounce around so an off week does not make a trend, but weak mortgage apps contemporaneous with the heated debate about the Fiscal Cliff may not be a coincidence. Purchase apps were down 4.8 percent and refi apps were down 13.8 percent. About four out of every five applications are now for refis. On a year-over-year basis the trends are more clear. Refi apps are up 45 percent from a year ago while purchase apps are up six percent.
Market Reaction: Equity markets are down. Treasury yields are down at the long end of the yield curve. NYMEX crude oil is up to $89.64/barrel. The dollar is up against the yen and up versus the euro.
Click here for a PDF version of the Comerica Economic Alert: Housing Starts 121912.