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Housing Starts & Building Permits Falls Last Month
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Erin Go Bragh! On this St. Patrick’s Day, we’re seeing no luck of the Irish for February Housing Starts and Building Permits, as both have come in well short of expectations. This had been an industry on a tear over most of the past 12 months, but supply constraints, especially on the single-family side, is proving to be a bottleneck, at least as of last month.
Housing Starts were expected to fall around 2.5% last month, but actually came in -10.3%, to 1.421 million seasonally adjusted, annualized units — well off the 1.54 million expected and the 1.58 million reported a month ago. While there is still plenty of multi-family homes on the market, single-family homes have dried up, with new builds growing prohibitively expensive. Lumber costs alone have risen more than 200% since April of last year.
Building Permits came in down even further: 1.682 million was -10.8%, down from the 1.75 million anticipated. Expectations were for a 7% drop for February, but coming from last month’s read of 1.886 million, this is not the place the main proxy for future housing starts wants to be. And while we’ve seen major homebuilders like Toll Brothers (TOL - Free Report) , KB Home (KBH - Free Report) and yesterday afternoon’s big earnings winner Lennar (LEN - Free Report) grow 260%, 226% and 150%, respectively, new starts are flat year over year.
By the way, this is not the same thing as diagnosing a stall-out of the overall economy; we’re seeing pent-up demand about to be sated by Covid vaccinations and big stimulus checks, and this will bring growth we may not have seen since the end of the Great Recession, maybe even before that. But much the way we’ve seen high-growth tech stocks sell off with rotation to cyclical value stocks, so we’re seeing this booming housing market cool off for a spell.
We’re quite sure Fed Chair Jay Powell will have plenty to say about this and a host of other things during his press conference this afternoon, scheduled for 2pm ET (although Powell has a habit of showing up early to these things, so be ready). Clearly, input expenses for new housing builds are demonstrating real inflationary pressure. Even the 10-year is creeping up toward that ever-elusive 2%, now at 1.67% as of Wednesday’s pre-market.
In all, however, these are pretty good problems to have. We know that demand for housing is still high despite the supply issues, and even if we are at the foothills of inflation, we remain near historic lows. While home-buying may not lead the consumer charge forward, that charge is coming nevertheless. To paraphrase the old Irish saying: “May your troubles be less and your blessings be more, and nothing but happiness come to your portfolio.”
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Housing Starts & Building Permits Falls Last Month
Erin Go Bragh! On this St. Patrick’s Day, we’re seeing no luck of the Irish for February Housing Starts and Building Permits, as both have come in well short of expectations. This had been an industry on a tear over most of the past 12 months, but supply constraints, especially on the single-family side, is proving to be a bottleneck, at least as of last month.
Housing Starts were expected to fall around 2.5% last month, but actually came in -10.3%, to 1.421 million seasonally adjusted, annualized units — well off the 1.54 million expected and the 1.58 million reported a month ago. While there is still plenty of multi-family homes on the market, single-family homes have dried up, with new builds growing prohibitively expensive. Lumber costs alone have risen more than 200% since April of last year.
Building Permits came in down even further: 1.682 million was -10.8%, down from the 1.75 million anticipated. Expectations were for a 7% drop for February, but coming from last month’s read of 1.886 million, this is not the place the main proxy for future housing starts wants to be. And while we’ve seen major homebuilders like Toll Brothers (TOL - Free Report) , KB Home (KBH - Free Report) and yesterday afternoon’s big earnings winner Lennar (LEN - Free Report) grow 260%, 226% and 150%, respectively, new starts are flat year over year.
By the way, this is not the same thing as diagnosing a stall-out of the overall economy; we’re seeing pent-up demand about to be sated by Covid vaccinations and big stimulus checks, and this will bring growth we may not have seen since the end of the Great Recession, maybe even before that. But much the way we’ve seen high-growth tech stocks sell off with rotation to cyclical value stocks, so we’re seeing this booming housing market cool off for a spell.
We’re quite sure Fed Chair Jay Powell will have plenty to say about this and a host of other things during his press conference this afternoon, scheduled for 2pm ET (although Powell has a habit of showing up early to these things, so be ready). Clearly, input expenses for new housing builds are demonstrating real inflationary pressure. Even the 10-year is creeping up toward that ever-elusive 2%, now at 1.67% as of Wednesday’s pre-market.
In all, however, these are pretty good problems to have. We know that demand for housing is still high despite the supply issues, and even if we are at the foothills of inflation, we remain near historic lows. While home-buying may not lead the consumer charge forward, that charge is coming nevertheless. To paraphrase the old Irish saying: “May your troubles be less and your blessings be more, and nothing but happiness come to your portfolio.”