January 21, 2021
Housing starts jumped 5.8% in December to 1,669 thousand after rising 3.1% in November and 6.5% in October. Like every other economic indicator, starts have rebounded sharply in the past eight months and have now surpassed the levels where they were in January and February. Starts would be at an even faster pace but builders have having difficulty finding lumber at a reasonable price given the fires in the West, qualified workers, and a lot shortage. Permits are also climbing higher and higher, but builders currently are unable to keep up. There is demand for a faster pace of construction, but supply constraints are curtailing how quickly it can rise.
One interesting point is that the recent growth in starts has all been in single-family homes.
Builders certainly expect the housing market to continue to do extremely well in the months ahead. The homebuilders confidence index for November now stands at 83 which is close to the October level which was a record breaking, 35-year high of 90.
One of the factors boosting homebuilders confidence is the fact that mortgage rates have fallen to a record low level of 2.7%.
Building permits climbed 4.5% in December to 1,709 thousand after having jumped 5.9% in November and having declined 0.1% in October. That is the highest level for permits since August 2006.
The economy continues to open up. Construction workers return to their jobs. Home builders have already seen traffic through their model homes pick up to where it was prior to the recession. Their confidence is high.. Mortgage rates have dipped to a record low level of 2.7%. Applications for mortgage refinancing have been rising steadily. Our sense is that starts will continue to climb to 1,700 thousand by the end of this year. And, for what it is worth, we expect GDP to rise 7.0% in Q4 and then grow at a 5.5% pace in 2021.