The numbers: Construction on new U.S. homes fell a seasonally adjusted 0.5% in November to 1.43 million, the Commerce Department said Tuesday.
The drop in construction on homes follows the decline in October, when housing starts also fell by 2.1%.
Economics polled by the Wall Street Journal expected housing starts to drop to 1.4 million from October’s initial estimate of 1.43 million.
The annual rate of total housing starts fell from 16.4% from the previous year.
In October, housing starts were revised to a drop of 2.1% of 1.43 million, as compared to a previous drop of 4.2%.
Building permits for new homes fell 11.2% to 1.34 million in November.
Economists had expected building permits to fall to a 1.48 million rate from October’s initial estimate of 1.51 million.
Key details: On an unadjusted basis, housing starts fell 9.1% in November.
The construction pace of single-family homes fell 4.1% in November and apartments rose 4.8%.
Permits for single-family homes fell 7.1% in November, while permits in buildings with at least five units plunged by 17.9%.
Overall construction in the West and the South led the jump with an 8.3% increase and 0.1% increase respectively.
Single-family construction was strongest in the West and Northeast, where housing starts rose by over 15% in November.
Big picture: While the drop in new home construction was small, it was still a fall.
A big reason why is that mortgage rates are still elevated, keeping buyer demand low and builders gloomy.
Rates have come off of the 7% mark and builders have been offering incentives to lure buyers, but home buyers are barely returning to the market.
There are signs of optimism though. The recent rise in purchase mortgage applications, tracked by the Mortgage Bankers Association, tells us that people are still buying homes.
Builders also said that even though they were gloomy all of 2022, they were feeling more optimistic about their expectations for sales in the next six months.
What are they saying? Single-family starts have fell in 8 of the last 9 months, Stephen Stanley, chief economist at Amherst Pierpont, wrote in a note. That’s a combined drop of 32%.
And while apartment starts rose modestly in November, expect that number to come back down in December since building permit issuance for those units sank, Stanley added.
Market reaction: U.S. stocks were set to open lower early Tuesday. The yield on the 10-year Treasury note rose above 3.65%.