NAROFF ECONOMIC ADVISORS, Inc.
Joel L. Naroff
President and Chief Economist

INDICATOR: November Housing Starts and Permits
KEY DATA: Starts: +8.9%; 1-Family: +2.1%; Permits: +6.0%; 1-Family: +5.3%
 
IN A NUTSHELL:  “The housing market continues to move forward and given the shape of the economy, the improvement is about as good as we could expect.”

WHAT IT MEANS: Housing continues to slowly but steadily improve.  Construction activity picked up in November, especially in the multi-family segment.  As preferences change, this component will likely become more and more important so we should not discount it.  Unfortunately, it is also the more volatile part of housing starts so we shouldn’t overestimate the importance any one month’s improvement or deterioration.  Single-family activity was up more moderately but is at the highest level in a year.  Geographically, the changes were inconsistent.  In the Northeast and Midwest, there were sharp rises in multifamily construction but declines in single-family activity.  In the West, the opposite occurred. The South posted gains in both components.  Looking forward, the jump in permit requests points to more home construction in the months to come.
 
MARKETS AND FED POLICY IMPLICATIONS: Housing is in a nice solid upward trajectory.  With the economy moving forward at a modest pace, unemployment rates remaining at double-digit levels and foreclosures still high, it would be unrealistic to expect this sector to grow any faster than it is.  Indeed, I believe it is doing maybe even better than would be projected if you just took the economic data into consideration. That is good news for investors who are likely waiting for the FOMC to give some hint about the future of rates.  Don’t expect any earth shaking news in today’s statement as there is little reason for the Fed to change its stance.  Until GDP growth picks up and/or the unemployment rate starts dropping, the pressure will be on the Fed to stay the low rate course.  I still think that policy will change sooner than others as I wouldn’t be surprised if fourth quarter GDP growth is well in excess of 4%.  Since that does not come out until the end of January, the FOMC can provide little new information today and get away with it.

 FROM: CHRISTOPHER J. BROWN, PRESIDENT

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