October Housing Starts: Doubly Disappointing

• October housing starts fell 0.7% from September, to 1.52 million (SAAR), according to the U.S. Census Bureau. Starts were up 0.4% from October 2020.
• Residential building permits filed in October were up 4% from September and up 3.4% from a year ago, to 1.65 million (SAAR).
• Home builders completed 1.242 million homes (SAAR) in October, unchanged from September and down 8.4% from October 2020.

Housing starts did not meet expectations in October, notching another monthly loss that is doubly disappointing because housing starts almost always rise this time of year -- on average, the jump in starts between September and October represents the sharpest monthly increase of the year. Over the last decade in particular, builders have settled into an autumn pattern of bouncing back from September’s east coast tropical storms and western wildfires and shifting into high gear in October in advance of the winter slowdown. The slump in the latest report instead suggests that builder activity has been hobbled by supply chain disruptions and labor shortages. Still, despite the relatively soft starts data, homebuilders seem to have plenty of confidence in favorable sales conditions today and over the next six months -- permits, the most dependable leading indicator of future building activity, notched a decent increase. For now, buyers remain plentiful and housing demand remains high despite persistent and elevated inflation, buoyed by a strong job market market, still-low but potentially soon-to-rise mortgage rates and demographic tailwinds.