Notes: Gray shading depicts National Bureau of Economic Research (NBER)-defined recession. Permits data extend through October 2023; sentiment data extend through November 2023.
Sources: U.S. Census Bureau, National Association of Home Builders, and NBER. All data sources accessed via Haver Analytics.
The number of single-family permits increased for the ninth consecutive month in October (blue line), leaving its three-month growth rate at 17.4 percent. In contrast, home builders’ sentiment has declined sharply in recent months, with the diffusion index in November falling well into the contractionary range (green line). Builder’s negative sentiment is surprising. Homeowners are gripping their low-rate mortgages, pushing sales listings to near their historic low and sales prices to a historic high. This lock-in effect is likely to persist for some time, suggesting that home construction will remain robust rather than reversing to follow sentiment downward.
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