Implications: After a blowout good number in April, home building took a breather in May, with a decline in both single-family and multi-family starts. To get rid of the volatility and see the underlying trend, we like to look at the 12-month moving average, which hit the highest level in May since October 2008. Despite the drop in starts in May, overall home building continued to increase: the total number of homes under construction, (started, but not yet finished) increased 1.4% in May and are up 20.6% versus a year ago. In the past year, 34.4% of all housing starts have been for multi-unit buildings, including apartments and condos, the most since the mid-1980s, when the last wave of Baby Boomers was leaving college. This makes sense. The homeownership rate is down and more people are renting. From a direct GDP perspective, the construction of multi-family homes adds less, per unit, to economic growth than single-family homes. However, with both the single-family and multiple-family construction trends upward, we expect home building to keep adding to real GDP growth for at least the next couple of years. Based on population growth and "scrappage," housing starts will eventually rise to about 1.5 million units per year (probably by the end of 2015). This is the level of construction that keeps the number of homes stable relative to the US population. Although building permits declined in May, it was all due to the volatile multi-family sector. Single-family permits rose 3.7%. We expect a sharp rebound in building permits next month.
Click here for PDF version
|
|
Posted on Tuesday, June 17, 2014 @ 9:12 AM
|