The housing construction numbers for September were not great. 1-unit detached starts declined -4.60% while 5+ unit starts (multifamily) declined -6.23%.
Permits were off for 5+ unit (multifamily) at -17.43% while 1 unit permits rose 2.38% in September.
As a reminder, The Federal Reserve dropped their target rate as a result of the 2001 recession and 1-unit starts took off. Construction was so hot that The Fed had to raise their start rate to cool-off the construction bubble. Rather than cool-off the construction bubble, The Fed sent it into deep freeze.
Alas, there wasn’t a Fed Funds rate reaction during the housing bubble, but there appears to be a negative reaction to multifamily (5+ unit) starts since The Fed began jacking up their target rate.
And with an 84% implied probability of a December rate hike, we should watch starts and permits carefully over the next couple of months.
And here is the path of future rate hikes (forward curve). As Samuel L Jackson said in Jurassic Park, “Hold on to your butts.”
The International Bubble Team in action!