Interest Rate Roundup

Wednesday, January 19, 2011

Housing starts fall, but permits rocket higher in December

We just got housing starts figures for December. Here's what the numbers showed:

* Housing starts dropped 4.3% to a seasonally adjusted annual rate of 529,000 from 553,000 in November. That missed expectations for a reading of 550,000 and was the worst reading since October 2009. But building permit issuance rocketed higher by 16.7% to a 635,000 SAAR from an upwardly revised 544,000 in November. That was the biggest monthly rise in permits going all the way back to June 2008.

* By property type, single family activity slumped 9% while multifamily starts jumped 17.9%. Single family permit issuance rose 5.5% while multifamily permits surged 53.5%. That left permits at their highest level since last March.

* Regionally, starts fell 2.2% in the South, 24.7% in the Northeast and 38.4% in the Midwest. Starts jumped 45.8% in the West. Permits rose in most of the country, gaining 3.3% in the Midwest, 43.9% in the West, and 80.6% in the Northeast. They slumped 7.6% in the South.

Last month didn't look so hot, but the future looks a lot better. That's the takeaway from the latest starts and permits figures. Construction slumped to a one-year low in December, yet builders of apartments, condominiums and houses pulled more permits than in any month since last March. The volatile multifamily market saw a huge surge, while activity in the core single-family market perked up at a more measured pace.

Bottom line: The figures point to continued improvement in housing, driven by increased buyer confidence and a gradual stabilization of the job market. But the recovery is a tepid one -- and will remain so in 2011 due to the overhang of foreclosed property, rising mortgage rates, and a "once burned, twice shy" mentality when it comes to real estate across mainstream America.


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