Interest Rate Roundup

Wednesday, December 16, 2009

Housing starts jump 8.9% in November

Housing starts and permits data for November were released this morning. Here's a recap of the numbers:

* Overall housing starts rose 8.9% to a seasonally adjusted annual rate of 574,000 in November from 527,000 in October. That was exactly in line with the forecast of economists. Permitting activity gained 6% to 584,000 from 551,000. That was a bit better than the 570,000 figure economists were expecting.

* By property type, single family starts gained 2.1% while multifamily starts soared 67.3%. How's that for volatility? Permitting activity was up 5.3% in the single-family market and 8.8% in the multifamily.

* The regional breakdown was positive across the board. Starts rose 1.9% in the West, 3% in the Midwest, 12.3% in the South, and 16.4% in the Northeast. Permits were up in three out of four regions -- by 2.7% in the West, 4.7% in the Northeast, and 10.7% in the South. They slipped 1.9% in the Midwest.

Another month, another sign of a bottom in construction activity. That's my read on the latest stats. We got positive news across the board, with starts and permitting activity increasing in both the single-family and multifamily markets. Strength was geographically broad-based as well, with healthy growth in the South region, the largest U.S. market for home building.

At the same time, you'd be hard-pressed to describe the improvement as dramatic. Unlike the "V"-shaped recoveries we've seen after previous housing busts, this one is much more anemic. Why? Even though builders are running with very lean inventories, they don't need to ramp production up aggressively. For one thing, demand remains relatively weak despite very low mortgage rates. For another, so much foreclosed and distressed inventory is hitting the market that it makes it tough for builders to compete. Tighter financing conditions are an important headwind, too. Even those builders who want to build more homes, townhomes, and apartment complexes are having a difficult time getting the money to do so.

Bottom line: The "three steps forward, two steps back" recovery in housing remains on track. But it remains a weak one.


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