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US housing: Hole in the plate – RBC CM

FXStreet (Delhi) – Research Team at RBC Capital Markets, notes that the US housing starts missed consensus expectations by -100K (falling to 1060K in October), which is a soft outcome even in the context of a very strong result last month.

Key Quotes

“The more volatile multi-family component drove the weakness as it slipped -25% sequentially after an +18% jump last month. However, beneath the surface, the permits numbers suggest the pipeline remains healthy. Single-family permits hit a fresh cycle high and multis also rose nicely m/m. So the miss on starts seems to be more about the monthly wiggles than any fundamental shift in the housing backdrop.”

“Despite the dip in multi starts, the broad narrative of increasing rental demand remains in place. Even with the slip in the share of mortgages in arrears per the latest mortgage delinquency data out yesterday, we still have 6.9% of mortgages either past-due or in outright foreclosure. Again, resolving these is a slow moving process.”

“The bottom line is that this is still 1.2ppts above the pre-crisis average and amounts to 0.5mn mortgages that still need resolution. It implies at minimum, some further downside in the homeownership rate and continued upward pressure on rent inflation (42% of core CPI).”

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