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U.S. housing starts rebound in October, housing market’s fundamental remain strong

Homebuilding recovered in October after the homebuilding activity was disrupted in August and September due to the hurricanes. Housing starts rose 155k to 1290k, coming in above consensus expectations for a rise in activity to 1,190k. Building permits also surprised to the upside, rising 72k to 1297k.

Single family starts rose 44k to 877k from an upwardly revised 4000 September reading. The more volatile multifamily segment contributed to most of the increase, rising by 111k to 413k from an upwardly revised reading in September.

Meanwhile, the number of building permits issued also increased with single family permits rising 16k to 839k. Multifamily permits rose 56k to 458k. In the South, activity rebounded strongly by 91k, as hurricane related rebuilding started. The Northeast and the Midwest also witnessed rise in activity, while the activity dropped in the West.

Overall, the report was good with the rise in activity, affirming that the earlier months’ lull in the activity was mainly because of hurricane disruptions and was thus temporary. Housing market’s fundamentals continue to be solid, with continuous wage gains and still-low mortgage rates continuing to underpin demand.

However, builders are likely to continue facing challenges in the months ahead, stemming from a dwindling pool of labor, noted TD Economics in a research report. A rise in demand in the South for construction workers related to hurricane-related rebuilding attempts could put a strain on builders in other regions. This will possibly result in rising costs for the homebuilders related to both labor and also building material costs.

Builders are expected to pass on some of the rise in costs to consumers in form of increased home prices, which might hinder demand in the near-to-medium term, added TD Economics.

“Still, given the solid fundamentals, we expect homebuilding to continue to grind higher over the medium-term, with residential investment being a positive contributor to growth in the coming quarters”, said TD Economics.

At 16:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was neutral at -49.5769. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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