US building permits fell month to month in November. They dropped from 1.412 million to 1.388 million.
That is a decline of 0.024 million permits. In other words, there were 24,000 fewer permits than the prior reading.
Early Warning From November Permits
The November 2025 decline in building permits was an early warning for the housing market. The fall to 1.388 million suggested that the higher interest rates from the prior year were starting to slow future building plans. This data point set a bearish tone that we have tracked closely.
New government data now supports that view. The January 2026 report, released yesterday, showed permits down another 2.1% to a seasonally adjusted annual rate of 1.33 million units. This suggests the weakness from late last year was not temporary. It looks more like part of a wider slowdown in residential investment.
For traders, this strengthens the case for bearish exposure to homebuilder stocks. The SPDR S&P Homebuilders ETF (XHB) has lagged the broader market and is down nearly 4% year to date in 2026. In the weeks ahead, we plan to buy put options on XHB, or on individual names like D.R. Horton, to target potential further downside.
The slowdown is also weighing on commodities linked to construction. Lumber futures have retreated from their January highs and now trade below $500 per thousand board feet. Traders may consider shorting lumber futures or using options on copper, as demand for building materials could weaken further.
Housing Weakness And Fed Policy Outlook
Ongoing housing weakness could also affect the Federal Reserve’s rate outlook. The Fed has kept rates steady so far in 2026. But if housing data stays weak, the odds of a rate cut later this year may rise. We are looking to position for this with call options on Treasury bond ETFs like TLT, which typically benefit when the central bank turns more dovish.
Create your live VT Markets account and start trading now.
here to set up a live account on VT Markets now
