U.S housing starts surge to over nine year high in October, homebuilding likely to continue rising

U.S. housing starts increased sharply in October to post recessionary high. It rose by 269k units to 1,323k units (annualized), marking an over 9-year high and exceeding expectations of a more moderate rebound to 1,156k units. Figure for the prior months were revised. September month’s print was revised upwardly, adding just 7,000 units to the still disappointing print, whereas 14,000 units were added to the August tally.

Most the rise in housing starts was focused in the multifamily segment, which recorded a rise of 185k units. This more than countered the losses of 110k registered in September. The rate of construction in the single-family segment also increased strongly in October, taking the level of single-family homebuilding to a new post-recessionary high of 869,000 units.

Meanwhile, building permits also rose in the month, increasing by 4000 units to 1,229 k units and approaching the high that was reached in November 2015. Single family segment permits rose 20,000; however, some were slightly countered by a moderate fall in the volatile multifamily segment after a strong rise in September.

The monthly rise was widespread geographically. The South led the way with recording a rise of 94,000. Midwest, West and Northeast regions followed with a rise of 67k, 65k and 43k, respectively.

Housing starts registered a strong recovery after September’s sharp fall that seems to be partially due to the anticipated landfall of Hurricane Matthew. Furthermore, housing permits activity continued to grind higher, which implies continued increases in homebuilding.

Post-election increase in mortgage rate exerts certain downside risk to the outlook for housing demand and construction. But the strong job and income rises might help counter most of the near-term rate shock and keep homebuilding on a positive course, according to TD Economics. Meanwhile, the pace of interest rate hikes by the U.S. Fed down the road appears to remain gradual and are expected to underpin future housing demand and construction activity, added TD Economics.

At 05:00 GMT the Hourly USD Strength Index stood bullish at 88.316. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex