 | Housing starts increased 5.8% in April to 672,000 units at an annual rate |
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Implications: Home building is now clearly in recovery. While there may be a temporary and minor dip in the months ahead due to the expiration of homebuyer tax credit, we think the housing market has turned the corner and will survive this, as well as any shrinkage of the Fed's balance sheet or any rate hikes that may come in the years ahead. Single-family housing starts – which are more stable than multi-family units – are up four months in a row to a level 54% higher than a year ago. They are also exceeding completions. As a result, for the first time since the housing bubble burst in 2005, the number of single-family homes under construction are up four months in a row. This should translate into more jobs in the home building sector as 2010 unfolds. Building permits fell in April, but remain 16% higher than a year ago. We anticipate permits will rebound next month. While inventories remain high in the housing market, we do not believe they will derail the housing recovery. First, even though home building is on the rise, it is still so slow that inventories can still be worked off. Second, inventories remain concentrated in very specific states and cities. Outside of those areas, inventory levels are significantly lower. In other recent news, the Empire State Index, a measure of manufacturing in New York, slipped to +19.1 in May from +30.0 in April. Although down, the index still signals acceleration in the factory sector, just not quite as rapid an acceleration as in April.
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