Implications: Housing starts increased for the third month in a row in September adding to the wide array of data undermining the case for a double dip recession. Single-family starts increased for the second month in a row while multi-family units, which increased 35%-plus in July and August fell 9.7%. Traditionally, multi-family units are extremely volatile from month to month, so a decline in September is not a surprise. However, as the top chart to the right shows, since late last year there is a clear upward trend in multi-family housing starts. In particular, these gains are due to structures that contain at least five units, not structures with two to four units. These data fit well with the decline in home ownership and the rise in rental occupancy, a trend that will likely continue for at least the next couple of years. Although excess housing inventories remain, they are falling rapidly and will continue to decline even in the face of a substantial recovery in home building. True, many former "homeowners" (we use that term loosely after an era of zero down payments) are becoming renters, but rental properties require construction too. When you hear stories about a "wave of foreclosures" lifting inventories, remember that when someone leaves their home to rent somewhere else that overall housing inventories do not change. In other news yesterday, the NABE housing market index rose to 16 in October, beating the consensus expected gain to 14. This is the highest level in four months, and is a good sign that residential construction is continuing to stabilize at these levels.
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Posted on Tuesday, October 19, 2010 @ 9:56 AM
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