 | Housing Starts Surged 20.2% in April |
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| Posted Under: Data Watch • Home Starts • Housing |
Implications: Boom! Great news on home building. After a weather-related soft patch in February and March, housing starts soared in April, coming in much higher than the consensus expected and at the fastest pace since 2007. And there's more where that came from: housing permits increased 10.1% and are now the highest since 2008. These figures support our view that concerns about the economy based on the first quarter are misplaced; the economy is set to rebound quickly, just like last year. In turn, this means the Federal Reserve still has enough ammunition to start raising short-term interest rates in June. Obviously, one month doesn't make a trend. Starts can be volatile from month to month, so to find the underlying trend we look at the 12-month moving average, which is at the highest level since September 2008. The total number of homes under construction, (started, but not yet finished) increased 1.5% in April and are up 14.8% versus a year ago. One interesting note is that we seem to have passed "peak multi-family" construction, at least as a share of overall home building. In the twelve months ending in September, 35.8% of all housing starts were multi-family units, the highest since the mid-1980s. Now that share is down to 34.9%. That's significant because the construction of a single-family home usually adds more to real GDP growth than a multi-family unit. Based on population growth and "scrappage," overall housing starts should rise to about 1.5 million units per year over the next couple of years, so a great deal of the recovery in home building is still ahead of us. In other recent housing news, the NAHB index, which measures confidence among home builders, declined two points to 54 in August, but the six-month sales outlook improved to 64, the highest so far this year. Readings greater than 50 mean more respondents report good market conditions. Just one year ago, the overall index was at 45. Expect further gains in housing in the coming months and years.
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