Housing starts measure initial construction of residential units (single-family and multi-family) each month. A rising (falling) trend points to gains (declines) in demand for furniture, home furnishings and appliances. Why Investors Care
| Released on 5/16/08 For Apr 2008 | |||||||||||||||||||||||
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Highlights
The housing sector in April rebounded unexpectedly but the improvement may actually reflect the fact that it is more difficult to get into single-family housing or at least merely volatility in multifamily starts. Starts rebounded 8.2 percent, following a sharp 13.8 percent drop in March. April's 1.032 million units annualized were still down 30.6 percent year-on-year and came in above the consensus expectation for a 0.940 million units. The April boost was led by a 36.0 percent rebound in multifamily starts as single-family starts slipped another 1.7 percent. Permits, which are issued before starts are initiated, also rebounded - by 4.9 percent in the latest month, following a 5.0 percent fall in March. April's 0.978 million unit permits were down 34.3 percent year-on-year. While the starts numbers are good news in terms of coming in better-than-expected, the details suggest that there is no improvement in the single-family sector and actually further decline. Multifamily starts may have improved because it is more difficult to qualify for home loans and renters cannot get out of apartments or simply the fact that multifamily starts are more volatile than single-family starts. The bottom line is that housing is still depressed but at least it may be leveling off.
By region, starts were led by a monthly 24.4 percent surge in the Midwest with the West and South also showing gains of 18.5 percent and 3.6 percent, respectively. In the Northeast, starts dropped 12.7 percent.
The bottom line is that today's starts report shows no improvement in the single-family sector. Given that this segment needs to improve before the consumer sector can strengthen and the economy overall, there really is no basis for euphoria as implied by the headline number.
Housing starts have yet to show any sustained sign of improvement and overall conditions in this sector give little reason to expect anything other than depressed levels of activity for some time. Starts plunged 11.9 percent in March for a year-on-year decrease of 36.5 percent, a rate exceeded only twice during the current contraction for the third worst rate since the 1991 recession. Permits, which are forward looking, fell 5.8 percent in the month for a 40.9 percent year-on-year decrease for the worst rate since 1991. A tight credit market, a weak jobs market, and bloated supply of unsold homes continue to depress the housing sector with no sign yet of improvement.
Housing starts Consensus Forecast for April 08: 0.940 million-unit rate
Range: 0.890 million to 0.985 million-unit rate
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Monthly figures are often volatile; housing starts fluctuate more than many indicators. According to the Commerce Department, it takes six months for total housing starts to establish a trend. Consequently, we have depicted total starts relative to a six month moving average. |
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