skip navigation

By the Numbers

Featuring brief segments of economic analysis from our senior economist Michael Bazdarich, PhD.

The economic analysis we previously featured in By the Numbers is now available on the Western Asset Blog. This page will no longer be updated.

November Housing Starts Hold up Well Beneath Dreary Headline Data

November housing starts came in pretty strongly, despite a 19% decline in headline starts. I know we have some “splainin” to do using “strong” in the same sentence as “19% decline,” but the story is really very simple. As usual, the headline starts number was driven by wild swings in multi-family starts, which dropped a whopping 45% in November.

The more important and more stable single-family component of starts dropped 4.1% in November, and even this decline came on the heels of a 10.5% rise in October. As seen in the accompanying chart, even with the November decline, single-family starts remain well above previously prevailing levels for 2016. So, yes, despite the scary-sounding headlines, today’s news was actually a favorable report.

And the economy needed it after most of the November and October data released in the last few weeks have come in on the weak side. Current data suggest 4Q16 GDP growth will come in much slower than the 3%+ 3Q16 growth currently reported by the Commerce Department. The better housing starts don’t reverse the downbeat outlook for 4Q16, but they are at least one piece of good news.

Our own forecast had been for flat housing activity. We thought the sharp bounce seen in October was a fluke that would be reversed in November, just as a similar bounce this past February was reversed in March. That hasn’t happened...yet. Maybe the November number will be revised or reversed next month. For now, though, both October and November data indicate a visible lift in single-family construction.

Single-family permits were also up in November (green line), though not as much as starts. New-home sales have not as yet risen enough to sustain the recent spurt in starts, and sales data going forward will be critical. Builders do not want to accumulate inventories, so they will need to see higher sales rates in order to sustain the recent rise in starts.

As for multi-family construction, the trend here has also been flat-to-down for the last year. Today’s data sustain that trend. Still, multi-family construction activity is just a small fraction of single-family activity (about 26%), so with single-family starting to trend higher, the overall housing picture has improved somewhat recently, despite the drop-off in multi-family.

Sales and Starts of New, Single-Family Homes
Sales and Starts of New, Single-Family Homes
Source: Census Bureau. As of 30 Nov 16

Michael Bazdarich

Product Specialist/Economist

Mike brings more than 43 years of experience to his position. "By the Numbers" will address economic data releases that are pertinent to a broad range of investors.

Prior to joining the Firm in 2005, Mike ran his own consulting firm, MB Economics. He earned his PhD in Economics at the University of Chicago.

Sign up to receive email updates as new reports are released.

© Western Asset Management Company, LLC 2020. This publication is the property of Western Asset and is intended for the sole use of its clients, consultants, and other intended recipients. It should not be forwarded to any other person. Contents herein should be treated as confidential and proprietary information. This material may not be reproduced or used in any form or medium without express written permission.
Past results are not indicative of future investment results. This publication is for informational purposes only and reflects the current opinions of Western Asset. Information contained herein is believed to be accurate, but cannot be guaranteed. Opinions represented are not intended as an offer or solicitation with respect to the purchase or sale of any security and are subject to change without notice. Statements in this material should not be considered investment advice. Employees and/or clients of Western Asset may have a position in the securities mentioned. This publication has been prepared without taking into account your objectives, financial situation or needs. Before acting on this information, you should consider its appropriateness having regard to your objectives, financial situation or needs. It is your responsibility to be aware of and observe the applicable laws and regulations of your country of residence.
Western Asset Management Company Distribuidora de Títulos e Valores Mobiliários Limitada is authorised and regulated by Comissão de Valores Mobiliários and Banco Central do Brasil. Western Asset Management Company Pty Ltd ABN 41 117 767 923 is the holder of the Australian Financial Services Licence 303160. Western Asset Management Company Pte. Ltd. Co. Reg. No. 200007692R is a holder of a Capital Markets Services Licence for fund management and regulated by the Monetary Authority of Singapore. Western Asset Management Company Ltd is a registered Financial Instruments Business Operator and regulated by the Financial Services Agency of Japan. Western Asset Management Company Limited is authorised and regulated by the Financial Conduct Authority (“FCA”). This communication is intended for distribution to Professional Clients only if deemed to be a financial promotion in the UK and EEA countries as defined by the FCA or MiFID II rules.