Implications: Home building has been very volatile over the past few months but the underlying trend remains upward and we expect that to continue. Housing starts jumped 20.8% in July, then dropped 12.8% in August, and now rebounded 6.3% in September. Some look at this volatility as weakness. We don't. The 12-month moving average is now at the highest level since September 2008. The total number of homes under construction, (started, but not yet finished) increased 0.4% in September and are up 19.5% versus a year ago. No wonder residential construction jobs are up 129,000 in the past year. Multi-family construction is taking the clear lead in the housing recovery. Single-family starts have been in a tight range for the past two years, while the trend in multi-family units has been up steeply. In the past year, 36% of all housing starts have been for multi-unit buildings, the most since the mid-1980s, when the last wave of Baby Boomers was leaving college. From a direct GDP perspective, the construction of multi-family homes adds less, per unit, to the economy than single-family homes. However, home building is still a positive for real GDP growth and we expect that trend to continue. Based on population growth and "scrappage," housing starts will rise to about 1.5 million units per year over the next couple of years.
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Posted on Friday, October 17, 2014 @ 10:49 AM
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