Announced this morning, Housing Starts were 1,358,000 in September, less than expected but a 7.0% increase over the previous month. In addition, Building Permits were 1,473,000 in September, more than expected but it was a decrease of -4.4% from the previous month.
Overall, an increase in starts and a drop in permits in September, which is the exact opposite that occurred the previous month. Given the magnitude of the increase in mortgage rates, volatility in these measures can be expected. Many individuals continue to stay in their current homes reducing the supply of available dwellings in the market, which gives homebuilders confidence to start new homes to fill that void. Additionally, some homebuilders are offering incentives to potential buyers, including buying points to reduce the mortgage rate to try to make them more affordable. While the housing market is only 4% of GDP, the impacts of housing seep into other areas of the broader economy. Given these dynamics, how well the housing market holds up amidst the higher for longer policy by the Federal Reserve will be a key component for the economy and markets in the months ahead.
In all, the 10-year US Treasury yield ticks higher following the report and equity futures are lower as we head into the market open.
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