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REPEAT: MNI DATA PREVIEW: Expect 3rd Straight Slip in Starts

Repeats Story Initially Transmitted at 19:15 GMT Oct 17/15:15 EST Oct 17
By Holly Stokes and Sara Haire
HIGHLIGHTS:
-Analysts see September housing starts and building permits to decline modestly
to 1.170m and 1.245m, respectively. 
-Hurricanes are expected to slightly stunt the number of housing starts and
building permits issued. 
-The range of forecasts for housing starts (1.144m to 1.220m) suggests some
analysts believe demand has increased recently, while other analysts think there
will be a slow down due mainly to the hurricanes, but will be short-lived in the
coming months. 
-The NAHB HMI rose to 68, up from 64, suggesting builders are rebounding from
the initial impact from the hurricanes, signaling a potential rise in building
permits and housing starts on the horizon. 
-Analysts voice growing concern over constrained supply of materials and
tightening labor market.
     WASHINGTON (MNI)- Amidst hurricane concerns and a tightening labor market,
analysts forecast the third consecutive decline in housing starts - expecting
September to post a 1.170 million annual rate. Building permits are expected to
slip to 1.245 million.
     Housing starts and building permits saw a drop in August, with analysts
suggesting the storms were mainly to blame for the original shock. BMO suggests
that housing starts had already lowered due to softer demand. A year earlier, in
September 2016, housing starts saw a 9% drop to 1.062m, suggesting analysts are
expecting relative strength for September despite the potential hurricane
impact.
     Tuesday morning, the NAHB released their housing market index, which rose
to 68 for October, up from the 64 reading seen in September. Analysts had been
expecting a small October rebound after the index dropped to 64 in September
from 67 in August. 
     As Jefferies economist Tom Simons explained, "the data release is stronger
than expected," which suggests the market has returned to the levels pre-storms.
While this may not affect housing starts for September data, it does indicate
that if there is another decline, it will be due to the temporary effects of the
hurricanes. 
     However, NAHB Chairman Granger Macdonald cautioned builders should be
mindful of the long-term impact from the hurricanes, citing potential increases
in material prices and labor shortages. 
     Several analysts echo Granger's concerns. BMO notes that large tariffs on
softwood lumber has led to a spike in material costs. Additionally, analysts see
a shortage of skilled labor and consequent wage increases as constrictive to
housing starts growth. 
     Despite expectations for a lackluster report, analysts emphasize that
forecasts do not reflect any concerns of a falling demand. In fact, Capital
Economics notes that new homes are selling at close to their fastest ever pace.
Goldman Sachs also believes that the drag from higher mortgage rates is now
waning, allowing for a potential pickup in single family demand and
construction.
     Other analysts are less optimistic for single family starts. Analysts such
as JP Morgan argue that August's gap between starts and permits actually
suggests single family starts are due for a decline. 
     August building permits point to a pickup in multifamily starts. While
Credit Suisse agrees that multifamily starts are due to catch up to permits,
they note that much of the discrepancy is centered in the South and West and
thus this rise may not be seen for several months due to hurricane impacts.
     While analysts predict soft September housing starts from a shortage of
supplies and the continued effects of Harvey and Irma, many anticipate that
construction will accelerate in the months ahead as hurricane damaged houses are
rebuilt. 
     However, some of the reconstruction efforts may negatively impact future
housing starts reports. Only rebuilds, not renovations are counted by the
Commerce Department, but renovations will mean increased demand for constrained
supply of materials and skilled workers. Morgan Stanley believes that the pace
of hurricane recovery will be determined by the availability of these resources.
     Looking past hurricane recovery efforts, BMO believes that future
residential construction will only be able to keep up with economic expansion,
rather than adding to it.
--MNI Washington Bureau; +1 202-371-2121; email: holly.stokes@marketnews.com
--MNI Washington Bureau; +1 212-800-8517; email: sara.haire@marketnews.com

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