 | Housing Starts Increased 0.2% in July |
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| Posted Under: Data Watch • Home Starts • Housing |
Implications: Another strong report on the home building sector. After booming in June, housing starts rose another 0.2% in July to a 1.206 million annual rate, the highest level since 2007. More importantly, the increase in July was all due to a 12.8% gain in single-family starts, which are much less volatile from month to month, add more (per unit) to GDP than multi-family units, and are up 19.0% from a year ago. The underlying trend for overall starts has been up since 2011 and we expect that trend to continue. Although permits for future building fell 16.3% in July, a huge drop, this comes on the back of the largest three-month gain since 1982. Some of that gain can be attributed to tax incentives for builders in New York that expired on June 15th. Builders tried to squeeze in as many permits as they could before the expiration. So it makes sense that permits declined by 60% in the Northeast in July. The decline in overall permits, as the chart to the right shows, just brings us more in line with underlying trend, which continues to move higher. The total number of homes under construction (started but not yet finished) increased 2.0% in July and is up 14.9% versus a year ago. Based on population growth and "scrappage," overall housing starts should rise to about 1.5 million units per year over the next year or so, which means a large part 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, increased to 61 in August, the highest reading since November 2005. Readings greater than 50 mean more respondents report good market conditions. Just one year ago, the overall index was at 55. Also yesterday, the Empire State index, a measure of manufacturing sentiment in New York, came in at -14.9 in August, the lowest since April 2009, versus 3.9 in July. However, we think this is an outlier and not the start of some new negative trend. The same survey showed that New York manufacturers were the most optimistic about the future than at any time in the past four months, a sign the slowdown seen in August is likely to be short lived.
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