• Housing starts in October edged down 4.2% to 1.425 million annualized units.
• Housing permits fell 2.4% in October to 1.526 million annualized units.
• Single-family starts are down 30% this year.
• The housing market recession will likely continue through 2023.

Housing starts edged down 4.2% in October to 1.425 million annualized units, worse than consensus expectations for a 2.0% decline to 1.410 million annualized units. Starts in September were revised slightly higher to 1.488 million from 1.439 million. Single-family starts fell 6.1% while multi-family starts fell 1.2%.

Residential construction permits were down 2.4% to 1.526 million in October. Single-family permits fell 3.6% to 839,000. Multi-family permits fell 1% to 687,000. Building completions fell 6.4% in October but were up 6.6% from October 2021.

The housing sector downturn continued in October amid high mortgage rates and elevated inflation. In a separate report released yesterday, homebuilder confidence as measured by the NAHB Market Index decreased to 33 in November. This marks the lowest level since June 2012 (excluding April 2020 at the beginning of the pandemic).

As seen in the broader economy, there is a divergence between construction sector output and construction employment. Construction employment has remained resilient despite the Fed’s hawkish policy, in part due to a large backlog of projects. The number of single-family homes authorized, but not started, rose slightly in October and is near the all-time high.

PNC expects further declines in homebuilding through the rest of this year and in 2023. PNC’s baseline forecast is for the housing sector to lead the broader economy into a three-quarter recession that starts in the second quarter of 2023.