Starts miss expectations, but uptrend remains intact
Housing Starts – February 2018
Housing starts came in below expectations falling 7.0% M/M to 1.236 million on an annualized basis.
▪ Starts are in a steady upward trend. The data is quite choppy and best viewed as a moving average to smooth out volatility. LendingTree prefers the 3-month average to balance timeliness with information value. The 3-month average of single-family starts of 875,000 is at its weakest level since October 2017, but we believe the uptrend remains intact. The multi-family 3-month average is recovering having sunk to a 4-year low in September.
▪ Growth is being driven by tight inventory. Inventories are constrained in both the new home and existing markets. 3-month average single-family building permits were the highest since 2007 as builders respond to the high demand. Builder confidence is high and construction jobs are increasing, all encouraging signs.
▪ Great start to 2018 after strong 2017. 2017 was the strongest year for homebuilding since 2007. The tax plan will also increase builder margins by 10-15%, encouraging more activity including at the lower end which has been underserved in the recovery.