Implications: Despite the drop in housing starts in December, the home building recovery is alive and well. Although housing starts fell by 2.5% in December to a 1.149 million annual rate, this comes on the back of a 10.1% gain in November and starts are still up 6.4% from a year ago. Many analysts (including us), thought unusually warm December weather would lead to a further gain in starts. This past December was the warmest for the most people since at least 1949. That's probably why starts increased 24.4% in the Northeast, which enjoyed that mild weather. However, it was also the wettest December in the lower 48 states since at least 1921, and that likely suppressed starts around the rest of the country. Month-to-month variations can be large so to take out the volatility in starts we look at the 12-month moving average, which is the highest since 2008 and up 10.6% from a year ago. Meanwhile, although permits to build homes also fell in December, that drop was all due to volatile multi-family permits; single-family permits rose 1.8%. Overall permits are up 14.4% versus a year ago while single-family permits are up a solid 8%. We expect housing to continue to be a bright spot in 2016-17. The total number of homes under construction (started but not yet finished) increased 1.7% in December and are up 18.5% versus a year ago. Based on population growth and "scrappage," we expect overall housing starts to rise to about 1.5 million units per year by 2017, so a great deal of the recovery in home building is still ahead of us. In other recent housing news from yesterday, the NAHB index, which measures confidence among home builders, was unchanged at 60 in January. Readings greater than 50 mean more respondents report good market conditions. One year ago, the overall index was at 57, and many said Fed tapering would drive it lower. But housing continues to grind higher. Even with higher short-term rates, expect the sector to keep adding to real GDP growth in 2016.
Click here for PDF version
|
|
Posted on Wednesday, January 20, 2016 @ 10:41 AM
|