Mixed messages from US permits as housing starts soar

This afternoon, the United States’ Census Bureau and Department of Housing and Urban Development released its latest November 2023 data relating to building permits.

The news was a mixed bag of some very good figures, with others surprisingly depressed. While the number of privately‐owned housing units authorised by building permits were lower than most expectations, the rate of new privately-owned houses increased by almost 15 percent.

The U.S. Census Bureau said in a release on the numbers that:

Particularly of note was US single-family housing starts, which increased a dramatic 18 percent.

This built on the positive momentum experienced in October’s building permit numbers. Last month, new construction projects on private housing increased by 1.1 percent to 1.48 million. Privately owned housing starts likewise rose by 1.9 percent to 1.372 million – slowing from the 3.1 percent growth in September, but better than the 1.350 million that had been estimated.  

About the US Building Permits

With the entire world having faced hawkish rate rises and depressed prices across most markets, all eyes are currently on America to see whether or not 2023 is in fact ending in the prophesied ‘soft landing’ and if things are as bullish as they appear. The Building Permits preliminary announcements are valuable barometers of this, as they give data on how much construction and infrastructure is being undertaken in the US by announcing the number of approvals to construct new buildings (or renovations of old ones) have been given by most American jurisdictions in the previous month.

A rise in permits is considered a solid leading indicator for an economic upswing – especially one of ‘reopening for business’ after a downturn. In particular the category of ‘housing starts’ is often seen as a barometer of how optimistic various key sectors of the American economy – such as construction and real estate – are feeling about the economy.

What do today’s US Building Permits numbers mean?

Generally speaking, a higher-than-anticipated number of building permits approved is the sign of a strengthening US dollar, while a lower-than-expected number may mean rocky times ahead for the USD. But November has brought higher-than-expected new housing figures, but lower-than-expected overall figures in privately‐owned housing units authorized by building permits… What can we take from this?

While this remains to be seen in the coming hours and days by closely watching the USD, the likely interpretation seems to be that forward-looking optimism in critical United States sectors is increasing, even if current figures (actual permits approved) have yet to bear this out in the present.

United States housing prices to soar?

Add to this the fact that American potential homebuyers are likely to take out more mortgages and purchase more real estate when the Fed drops its interest rates in the coming year, and you have all the ingredients necessary for a notable increase in interest in the US housing market, which had cooled somewhat after real estate reached all-time highs in many states during 2022’s most hawkish months.