Via incentives, mortgage write downs, and limited availability of existing homes to buy, the builders are holding up much better than real estate agents. 
Permits
- Privately-owned housing units authorized by building permits in September were at a seasonally adjusted annual rate of 1,473,000.
- This is 4.4 percent below the revised August rate of 1,541,000 and is 7.2 percent below the September 2022 rate of 1,588,000.
- Single-family authorizations in September were at a rate of 965,000; this is 1.8 percent above the revised August figure of 948,000.
- Authorizations of units in buildings with five units or more were at a rate of 459,000 in September.
Housing Starts
- Privately-owned housing starts in September were at a seasonally adjusted annual rate of 1,358,000.
- This is 7.0 percent (±15.8 percent) above the revised August estimate of 1,269,000, but is 7.2 percent (±12.1 percent) below the September 2022 rate of 1,463,000.
- Single-family housing starts in September were at a rate of 963,000; this is 3.2 percent (±10.8 percent) above the revised August figure of 933,000.
- The September rate for units in buildings with five units or more was 383,000.
Completions
- Privately-owned housing completions in September were at a seasonally adjusted annual rate of 1,453,000.
- This is 6.6 percent (±10.2 percent) above the revised August estimate of 1,363,000 and is 1.0 percent (±13.7 percent) above the September 2022 rate of 1,438,000.
- Single-family housing completions in September were at a rate of 998,000; this is 5.3 percent (±11.2 percent) above the revised August rate of 948,000. The September rate for units in buildings with five units or more was 445,000.
Things Relatively Stable In 2023
- Starts and permits have been relatively stable since November of 2022 (yellow highlight).
- Starts peaked at 1,803,000 in April of 2022, at a seasonally-adjusted annualized rate (SAAR), and are now 1,358,000.
- Permits peaked at 1,948,000 in December of 2021, at a seasonally-adjusted annualized rate (SAAR), and are now 1,473,000.
Expectations and Revisions
The Bloomberg Econoday consensus was 1.39 million starts vs 1.358 million actual.
The Commerce Department revised August starts from 1.283 million to 1.269 million, so this bounce is nowhere near as good as it looks from the headline number.
Negative revisions are the norm in most of the recent housing reports.
Also note the margins of error for starts at (±15.8 percent). This bounce may not have happened at all.
Major Boom-Bust Swings
Housing starts now are about where they were in 1959. They are just over half what they were in in four major boom cycles but well over bust lows.
With mortgage rates at fresh 23-year highs near 8.0 percent, it’s a combination of builder incentives al lack of supply of existing homes that have prevented a deep crash in starts.
Existing-Home Sales Decline 17 of Last 19 Months – Yes, This is a Crash
On September 21, I commented Existing-Home Sales Decline 17 of Last 19 Months – Yes, This is a Crash
Prices have not crashed but transactions have. Crashes are rare, but we are in one now, from a transaction perspective.
People who want to move are effectively trapped in their houses because they do not want to trade a sub-3% mortgage for a 7.0% mortgage [now 8.0 percent].
The bidding wars we do see are from people who are price insensitive. They make for amusing anecdotes but the above chart shows the real picture.
This crash is likely to last longer because intertest rates are likely to stay higher for longer because the Fed fears stoking more inflation.
Housing Units Under Construction
There is still an enormous number of units under construction with single-family completions happening rapidly and multi-family hardly at all.
On October 2, I asked When Will Record Housing Units Under Construction Ease Rent Inflation?
That’s really a trick question. For a better question, remove the lead “when” from the sentence: Will Record Housing Units Under Construction Ease Rent Inflation?
For discussion, please see the above link.
How the Fed Destroyed the Housing Market and Created Inflation in Pictures
Finally, please see my post How the Fed Destroyed the Housing Market and Created Inflation in Pictures for discussion of how the Fed created this dual housing problem of crashing existing sales but rising prices.
The correct response to stagflation is the 1966 Interest Rate Adjustment Act. “while the aggregate of time and demand deposits continued to increase after July, the proportion of time to demand deposits diminished. Whereas time deposits were 105 percent of demand deposits in July, by the end of the year, the proportion had fallen to 98 percent. These were all desirable developments.”
M1 peaked @137.2 on 1/1/1966 and didn’t exceed that # until 9/1/1967 (21 months). Deposit rates of banks decreased from a high range of 5 1/2 to a low range of 4 % (albeit not enough). A .75% interest rate differential was given to the nonbanks to promote nonbank lending.
And during this period, the unemployment rate and inflation rates fell. And real interest rates rose for saver-holders via the intermediaries.
Contrary to the universal ideation, banks don’t lend deposits. Deposits are the result of lending. Lending by the banks is inflationary. Lending by the nonbank intermediaries is noninflationary (is a velocity relationship).
The real output of goods and services results from driving the banks out of the savings business (where savings are impounded). But this course of action doesn’t reduce the size of the payment’s system. It just makes the banks more profitable.
Powell has now maintained a tight money policy for 18 months, from $4,812.8 3/1/22 to $4,903.9 on 8/1/23.
Could you please explain the dollar figures in you last sentence. What do those numbers represent?
They are the deposits that have the highest deposit turnover.
20 Year Treasury bond hit 5.2%….. choo! choo!
Until major unemployment, the data will be artificial at best. There is a generation that never experienced a recession let alone depression which is banned from the conversation.
In addition, low unemployment was achieved by runaway printing, hence the prices only go up, and FOMO.
Mortgage rates hit 8% today. I’m wondering how the housing market has any life at all considering the prices.
A good rate 30 years ago.
Yes, but prices vs. median salaries are at least 2x what they were 30 years ago.
At least even more in my case
Imagine the carnage at 12% plus
Great news! I’m looking for a new build and the more on the market, the better the price I’ll get.
Wish you luck Patience will be your friend
Agree, given affordability levels prices either have to come down or salaries way up. I don’t think the fed is going to tolerate the latter.
Or I guess the third option is interest rates come way down. I think a fall off in prices is the most likely although it’s probably some combination of all 3.
If interest rates come way down look for hyperinflation/ collapse of the dollar to be speeded up considerably
We’re looking for the same when we retire. Builders are making a lot of concessions. They have bank loans to pay so they have to sell. Maybe we’ll get lucky and someone will back out of their contract. Paying cash has it’s benefits.
Off topic but Jordan lost again. Cue the circus music….