NAROFF ECONOMIC ADVISORS, Inc.
Joel L. Naroff
President and Chief Economist
INDICATOR: October Housing Starts and Permits
KEY DATA: Starts: +3.6%; 1-Family: -0.2%; Permits: -2.7%; 1-Family: +2.2%
IN A NUTSHELL: “Housing is taking its place at the head of the economic parade as the recovery is clearly accelerating.”
WHAT IT MEANS: Another housing number, another sign that the sector that started the downslide is now becoming the sector that leads the recovery. In October, housing starts rose to their highest level since July 2008 and that happened despite storm of the century Sandy. Over the year, starts are up over 40% with an increase of 23% in the last three months alone. This might raise some questions about the sustainability of the gains, but I don’t think developers have gotten too much ahead of themselves. Housing permits have risen at a faster pace over the last three months than starts so the October level, though probably elevated, doesn’t look to be way out of hand. Most of the decline in permits was in the volatile multi-family component so I am not overly worried. After a surge in single-family construction in September, builders caught their breath. That the gains were essentially sustained is really good news. Meanwhile, multi-family construction keeps getting stronger and I expect that to continue. The number of home currently under construction rose solidly as well and that points to more hiring.
MARKETS AND FED POLICY IMPLICATIONS: This was a strong report that follows yesterday’s robust existing home sale, home price and builders’ confidence numbers. All this went on despite the negative effects of Sandy so it says a lot about the housing market. And once the rebuilding from Sandy takes place, the housing data could become a lot stronger. This sector has made the turn and it is adding to growth. Thus, one of the two beasts that ate the economy has been tamed. Now if we can get credit more readily we could see the economy really take off. That assumes, of course, that the fiscal cliff risk is avoided. With all the pressure building on Congress and the president to make a real deal, the likelihood of compromise has increased sharply. Really, the election didn’t change anything? Right. It appears to have changed everything. Democrats are talking spending cuts, which is another way of saying entitlement spending has to slow. Meanwhile, Republicans are talking revenue increases, which is another way of saying I will raise your taxes but not tell you I am doing that. Wow, elections do have consequences. With housing strong and vehicle sales likely to rebound as people replace Sandy-destroyed autos, the economy is on the rise. As I have said before, the only thing we have to fear is Washington itself.
# # #
RE/MAX Connection Realtors is not a licensed financial advisor and is not providing any financial advice. You should consult with a licensed financial advisor prior to making any financial decisions. RE/MAX Connection Realtors only is providing this economic statement from Naroff Economic Advisors, Inc. for informational purposes.
Our company accepts no liability for the content of this email/blog, or for the consequences of any actions taken on the basis of the information provided. Any views or opinions presented in this email/blog are solely those of the author and do not necessarily represent those of the company. Finally, the recipient should check this email and any attachments for the presence of viruses. The company accepts no liability for any damage caused by any virus transmitted by this email.
RE/MAX Connection Realtors, 1000 Lincoln Drive East, Suite Two, Marlton, NJ 08053 www.goconnectionnj.com
# # #