What I Saw Last Week

The NAHB Housing Market Index for October rose from 64 to 68 – I had forecast a rise to 66.


All three HMI components posted gains this month: The component gauging current sales conditions rose five points to 75, the index charting sales expectations in the next six months was up by five points to 78, and the component measuring buyer traffic squeaked out a one-point uptick to 48. Looking at the three-month moving averages for regional HMI scores, the South rose two points to 68, the Northeast rose one point to 50, and the West and Midwest remained unchanged at 77 and 63, respectively.

This month’s report shows that home builders are rebounding from the initial shock of the hurricanes. However, builders need to be mindful of long-term repercussions from the storms, such as intensified material price increases and labor shortages.

U.S. Housing Starts declined 4.7% month-over-month to a seasonally adjusted annual rate of 1.127M units – I had forecast a drop to an annual rate of 1.160M.


The starts data was accented by a 4.6% decline in single-family starts and a 5.1% decline in multi-unit starts. Single-family starts, however, were up in all regions, with the exception of the South (-15.3%).

The number of units under construction at the end of the period increased 0.3% to 1.082 million. That brings the third quarter average to 1.076 million, which is slightly above the second quarter average of 1.070M

U.S. Building Permits which are a leading indicator, decreased 4.5% to a seasonally adjusted annual rate of 1.215M units – I had forecast a drop to 1.225M.


The month-over-month decrease in building permits was driven entirely by multi-family units. Single-family permits were flat while multi-family permits declined 16.1% after increasing 12.9% in August.

The key takeaway from the starts/permit reports was that the weakness in both starts and permits was concentrated in the South region, which suffered the biggest hit from the hurricanes, so one could reasonably assume that the October report will show better results.

U.S. Existing Home Sales increased 0.7% month-over-month in September to a seasonally adjusted annual rate of 5.39M units – I had forecast 5.29M.

Existing sales

The September sales pace is 1.5% below a year ago and the second slowest seen over the past year (behind August).

The median existing home price for all housing types increased 4.2% to $245,100, which was the 67th straight month of year-over-year gains. The median existing single-family home price was $246,800, up 4.2% from a year ago.

Existing sales $

The inventory of homes for sale at the end of September (1.90 million) is 6.4% lower than the same period a year ago and has fallen year-over-year for 28 consecutive months.

Unsold inventory is at a 4.2-month supply at the current sales pace, versus 4.5 months a year ago and the 6.0-month supply typically associated with a more balanced market.

The takeaway from the report is that notable supply constraints remain, which will continue to act as a drag on overall sales due to the limited inventory and the high prices on available inventory that is crimping affordability

What to Watch for This Week

U.S. New Home Sales were running at an annual rate of 560,000 units in August and the September number is likely to show a small pullback to 555,000.

The NAR Pending Home Sales Index for September is likely to turn around from the 2.6% decline seen the prior month. Look for it to have risen by 0.8%.

The first reading for GDP in Q-3 should show that the US grew by 2.4% – down from 3.1% in Q-2.

The final Consumer Sentiment number for October should drop from 101.1 to 101.0.