Interest Rate Roundup

Friday, July 17, 2009

Housing starts, permits pop in June

The latest figures on home construction just hit the tape. Here's a rundown ...

* Total housing starts came in at 582,000 in June, up 3.6% from an upwardly revised 562,000 in May. Permitting activity also climbed -- 8.7% to 563,000 from 518,000 a month earlier. Starts haven't been higher than this since November..

* By property type, single family construction activity rose 14.4%, while multifamily construction dropped 25.8%. Single family permits rose 5.9%, while multifamily permits rose 18.8%. The increase in single family building was the biggest since December 2004.

* Regionally, starts rose 28.6% in the Northeast and 33.3% in the Midwest. Starts fell 1.4% in the South and 14.8% in the West. Permitting activity was up in all four regions, with the South leading the way at 13.9% and the West showing the weakest growth at 1.9%.

For some time, I've mentioned that the housing market is showing signs of stabilization. Not a robust recovery, but an end to the "cliff diving" we saw in 2007 and 2008. This phase will be marked by ongoing price declines in many locales, albeit more gradual ones. We will also see a gradual stabilization in sales rates ... a gradual decline in the level of inventory for sale ... and a gradual bottoming out of construction activity. Today's starts and permitting figures fit with this projection, as did yesterday's NAHB report on builder optimism.

Again, though, the word to emphasize is "gradual." The new home industry has done a good job of reducing supply -- with inventory for sale now in line with the long-term average. But the existing home market is still vastly oversupplied, and we continue to be inundated with an influx of distressed and foreclosed properties. That means anyone hoping for a robust "V"-shaped recovery is likely to be disappointed.


  • WRT housing starts, Barry Ritholtz at points out that, " 3.6% with a margin of error of 11.3% = YOU DON”T KNOW." (YoY is still "New Starts down 46%, Permits down 52%"). If a result could be anywhere from minus 7.7% to plus 14.9% there is not much point in getting excited about 360 bps one way or another even if they do seem to fit into a longer trend.

    WRT hopes for a "V"-shaped recovery, Ritholtz channels Nouriel Roubini at arguing that we are way past the point of wishing for "v"-shaped recoveries because the issue is already settled; It's a "U"-shaped recovery with the unemployed experiencing something that feels a lot more like an "L" with the very real possibility of a second "U" down the pike regardless, a possibility that becomes highly probable if congress turns tail and become the punks of the cut-deficits-now-rather-than-later crew.

    By Anonymous RW, at July 17, 2009 at 8:57 PM  

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