Implications: Home building was stuck in the mud in August, both literally and figuratively. Housing starts declined 5% and fell short of consensus expectations. In addition, the total number of homes under construction fell to a new record low (since at least 1970). However, the weakness in August was largely due to Hurricane Irene. In the face of reports about the on-coming hurricane as well as its actual landfall and aftermath, builders postponed breaking ground on new homes. Excluding the Northeast, which was the hardest hit region, single-family starts were unchanged in August, which pretty much sums up the state of single-family construction for the past couple of years. Multi-unit starts were down in August, but as the chart above shows, are still in a general rising trend as more former homeowners become renters. The brightest news from today's report was that permits to build new homes were up 3.2% and came in well above consensus expectations. Permits are now up 7.8% versus a year ago. Excluding the temporary burst in activity in late 2009 and early 2010, which was due to the homebuyer tax credit, this is the steepest climb in permits since 2005, back before the housing collapse began. The rise in permits is consistent with our view that housing is at or very close to an upward inflection point. Based on population growth and "scrappage" rates, home building must increase substantially over the next several years to avoid eventually running into shortages.
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Posted on Tuesday, September 20, 2011 @ 10:01 AM
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