Implications: Housing starts fell a whopping 16.5% in April but almost all of the decline was due to the multi-family sector, which is extremely volatile from month to month. For example, in March, multi-family starts rose 25.6% but fell 38.9% in April. Single family starts fell 4.5% in March and another 2.1% in April. We expect multi-family starts to bounce back in April while single family starts return to their upward trend, pushing up total housing starts. As you can see from the chart to the right, the underlying trend in housing is upward and we expect large 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). The best news today was that housing permits boomed in April with gains in both multi-family permits and single-family. Single-family building permits were up 3.0% in April and are up 27.5% from a year ago. The bottom line is that no one should get worked up over every zig and zag in the data. Sometimes one indicator ticks down, like housing starts; other times an indicator, like building permits, will surge up above the underlying growth trend. That's what a recovery looks like. In other news this morning, the Philadelphia Fed index, a measure of manufacturing in that region, declined to -5.2 in May from +1.3 in April. We expect a rebound in the months ahead. It's still a Plow Horse economy.
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Posted on Thursday, May 16, 2013 @ 11:35 AM
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