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 7/17/08 For Jun 2008 | |||||||||||||||||||||||
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Highlights
Housing starts in June posted an unexpected rebound and provide welcome news in tandem with today's better-than-expected earnings news and jobless claims. However, strength was lopsided - mainly in New York City and based on a one-time change in regulations. Starts rebounded 9.1 percent, following a 2.7 percent decline in May. The June pace of 1.066 million units annualized was down 26.9 percent year-on-year and was above than the market forecast for a 0.960 million units.
However, the June rebound was led by a 42.5 percent monthly surge in multifamily starts as single-family starts fell 5.3 percent. The surge in multifamily starts reflected the enactment of more restrictive building codes in New York City effective July 1, 2008 which created a rush to get permits before that date which in turn boosted starts. The single-family starts pace of 0.647 million was down from 0.683 million in May and was down 43.0 percent on a year-ago basis.
Overall permits also increased - by 11.6 percent in June, following a 0.4 percent drop in May. June's 1.091 million unit pace for permits was down 23.9 percent year-on-year. Strength was in the multifamily component.
By region, the rebound in starts was led by a monthly 102.6 percent surge in the Northeast. The South also made a positive turnaround, rising 0.4 percent. Meanwhile, the Midwest and West fell 10.5 percent and 8.2 percent, respectively.
Today's report provides some relief for construction workers but not for realtors as strength was in the multifamily component and the single-family component continued to slide. But the markets have expected continued weakness in that sector and pre-open news on company earnings was better-than-expected for key Dow components - earnings were not as down as feared. Markets will be focusing on earnings relief. Meanwhile, interest rates are firming and equities are poised to rise. But looking ahead, expect at least a partial reversal of the starts gains next month.
Housing starts continue to be weighed down by inventory overhang of unsold homes and by tighter credit standards as starts fell 3.3 percent in May to an annualized pace of 0.975 million units, following a 2.0 percent rebound in April. The May pace was down 32.1 percent year-on-year. The May decline was led by an 8.0 percent drop in multifamily starts as single-family starts fell another 1.0 percent. May's overall level was the lowest since 0.921 million units in March 1991.
Housing starts Consensus Forecast for June 08: 0.960 million-unit rate
Range: 0.935 million to 0.990 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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