Coming at the same time as an inflationary report which showed Core CPI rising at 2.30%, or the highest rate since October 2008, and one which will put further pressure on the Fed to hike rates as shelter inflation is now simply too big to sweep under the rug, we also got February’s housing starts and permits, which while painting a mixed picture of the US housing market suggested further strength in the US housing sector in the past month.
Housing starts rose from last month’s disappointing an upward revised 1,099K (now 1,120K), to 1,178K, beating expectations of a 1,150K print, driven by a jump in single-family housing which rose from 767K to 822K, the highest print since the recession, on the back of a rebound in West (24.8%) and Midwest (18.6%) single-family housing, while multi-family or “rental” units were almost unchanged, rising from 333K to 341K.
Permits, on the other hand, disappointed, sliding from an upward revised 1,204K to 1,167K, below the 1,200K consesus expectations, where single-family rose fractionally from 728K to 731K, even as multi-family permits declined by 9.1% from 441K to 401K, the lowest print since September 2015, and perhaps suggesting that home builders are refocusing their attention away from rental units and back to single-family housing.
However, with most American households unable or unwilling to splurge for the privilege of owning a home, this slowdown in the rental pipeline will likely mean less rental supply in the coming months, putting further pressure on already record rents, and leading to even core inflation in the coming months, forcing the Fed to act with even more resolve when it comes to tightening financial conditions and popping the rental bubble before it gets too far out of hand.
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