Implications: Housing starts soared 7% in March, defying consensus expectations of only a small gain due to unusually cold March weather. At 1.036 million, the annual rate of starts is now the highest since mid-2008. However, the underlying details were not quite as strong as the headline. All of the gain in starts in March was due to the multi-family sector, which is extremely volatile from month to month; single-family starts declined 4.8%. As a result, we expect multi-family starts to drop back down next month, dragging down the top-line number as well. Still, the underlying trend in housing is upward and we expect large percentage gains for residential construction for at least the next two years, probably longer. Based on population growth and "scrappage," housing starts will eventually rise to about 1.5 million units per year (probably by 2015). Housing permits were down in March but almost all of the decline was due to the multi-family sector. Single-family building permits were down only 0.5% in March and are up 27.7% from a year ago. In other recent housing news, the NAHB index, which measures confidence among home builders, slipped to 42 in April from 44 in March. However, the index for future single-family sales increased to 53 from 50. The key here is that the underlying trend in the housing industry is clearly upward and the gains have much further to go. Don't get worked up over every zig and zag in the data. Sometimes one indicator ticks down, like the NAHB; other times an indicator, like housing starts, will surge up above the underlying growth trend. That's what a recovery looks like.
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Posted on Tuesday, April 16, 2013 @ 9:50 AM
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