Why 2017 Was Good for the Housing Market

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Why 2017 Was Good for the Housing Market PART 1 OF 4

Housing Starts Rose Due to Single-Family Construction

Housing starts rose in November

It has been another positive month for housing starts due to reconstruction efforts in hurricane-battered areas. In November, housing starts rose 3.3%, which takes the annual increase to 12.9%. The US Census Bureau and Department of Housing and Urban Development have reported housing starts for November at 1.297 million—an increase from an upward revised October reading of 1.256 million. Single-family housing starts, which are considered to have a higher positive impact on the economy, have risen 5.3% from an upward revised 883,000 in October to 930,000 starts in November.

It’s recommended that housing (PKB) starts are analyzed over a period rather than on a monthly basis to account for high volatility in the segment.

Housing Starts Rose Due to Single-Family Construction

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Regional trends in the housing market

The southern region continued to rebound with activity after the hurricanes. The western region also improved in November. The single-family housing is at a decade high in both of the regions, which added to the positive improvements in the segment. The impact of hurricane-related rebuilding efforts on housing starts fell from 60% in October to 26% in November.

Single homes contribute the most towards economic growth. Single-family homes witnessed solid 8.4% YTD (year-to-date) growth.

Implications for homebuilders

Continued improvement helped companies in the housing market. Companies like Lennar (LEN) and D.R. Horton (DHI) have declared earnings of $1.06 and $0.82 in their recent results. The industry’s positive outlook could help improve their performance in 2018.

From the ETF space, the SPDR S&P Homebuilders (XHB) ETF, which has holdings in D.R. Horton, PulteGroup, and Lennar, has returned 31.20% YTD. The DJ US Home Construction ETF (ITB) has returned 59.41% this year.

In the next part of this series, we’ll analyze building permit data from November.


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