Implications: Housing starts bounced back in March and were revised up sharply in February. As a result, the March levels blew away a relatively optimistic consensus forecast. Single-family starts rose 7.7%, while multi-family starts grew 5.8%. The general upward trend in multi-family starts, particularly those with 5 or more units remains intact and is growing from both a construction and permit perspective. This supports the idea more people are shifting toward renting and away from buying. Deeper down in the report came news that both total units under construction and total units where construction was completed hit record lows going back 40 years. As a result, inventories will continue to fall. Residential construction has fallen so far that it is now only 2.3% of GDP, almost the lowest level on record. It can't, and won't, go much lower. That's what today's housing starts data signal. While there are still excess inventories, these homes are concentrated in a few cities, states and regions. Many areas of the country are running on empty, with new construction falling behind the need. This will continue to push rents higher, and with home prices already at a 50-year low relative to rents, home building activity and sales should continue to climb. The only caveat is that unreasonably tight credit conditions and an uncertain regulatory landscape remain very real headwinds.
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