Building Starts, Permits Still Marching Forward
The slow, steady rebound of the home construction industry is still moving along, with the number of starts as well as the number of building permits issued extending forward progress that dates all the way back to 2011.
Last month, the United States saw an annualized pace of 1.206 million home-starts... the second-highest level seen since 2007, and rivaling the broad uptrend's peak of 1.211 million hit in June. The number of permits issued fell from 1.161 million in August to an annualized pace of 1.103 million in September. Although the recent numbers have paled in comparison to this summer's surge, the longer-term trend remains a productive one.
Housing Permits & Housing Starts Chart
While other economic data like contracting wages and choppy job growth has hinted that consumers aren't in a prime position to commit to buying a home, the home-building trends themselves suggest otherwise. This, of course, bodes well for homebuilding stocks (XHB) like Lennar (LEN) and D.R. Horton (DHR), both of which have been in long-term uptrends that have been well-supported by earnings growth from both builders.
The housing starts and building permits number for September are consistent with Monday's report that the National Association of Home Builders/Wells Fargo confidence gauge reached its highest level in a decade this month... a reading of 64, versus the prior peak of 61 seen in October of 2005.
Though the threat of higher interest rates looms over the homebuilding trend, not only has the likelihood of an increase in the Fed Funds been pushed back to the middle of 2016, a mere quarter-point rate hike may not actually stifle this burgeoning demand for new homes, which may be even stronger than the recent numbers imply.
In August, new home sales reached a multi-year high of 552,000 units, while the supply of new homes available for purchase fell back to only 4.7 months, nearing a multi-year low of 4.0 month seen in 2013. For perspective, the typical supply of new homes for sale in the real estate heydays between 2006 and 2008 was well above seven months.