Housing Starts a Mixed Bag

by Peter Thomas Ricci

Data released by the U.S. Census Bureau in conjunction with the Department of Housing and Urban Development indicated that privately-owned housing starts were at a seasonally adjusted annual rate of 896,000 in July, 6 percent above the upwardly revised June estimate of 846,000 and 21 percent above the July 2012 rate of 741,000.

“Builders are making every effort to keep up with the rising demand for new homes and apartments, and construction in both sectors is running well ahead of the pace we saw at this time last year,” noted Rick Judson, chairman of the National Association of Home Builders (NAHB) and a homebuilder from Charlotte, N.C. “However, ongoing issues with accessing credit and limited supplies of finished lots and labor are making it tough to do that, particularly for single-family builders.”

“This report is in line with our forecast for continued, gradual strengthening of housing starts and permit activity through the rest of the year,” said NAHB Chief Economist David Crowe. “The double-digit bounce-back on the multifamily side was in keeping with typical month-to-month volatility in that sector, while the sideways movement in single-family was a result of unusually wet weather in the South and West.”

The month-over-month increase in housing starts reflects sizeable gains in multifamily housing. According to the release, multifamily housing starts rose by 26 percent over the month of July to a seasonally adjusted annual rate of 305,000, partially offsetting the 25 percent decline that took place in June. On a three-month moving average basis, which smooths the volatility, multifamily housing starts increased by 6 percent to 290,000. Despite the increase, the three-month average of multifamily housing starts remains below the 300,000 level that was recorded in the first five months of the year.

Meanwhile, growth in total private housing starts was partly restrained by a slight dip in single-family housing starts. Over the month of July, single-family housing starts fell 2 percent to 591,000 units. Geographically, the month-over-month declines took place in the South (-5 percent) and in the West (-10 percent), while single-family housing starts in the Northeast (12 percent) and the Midwest (10 percent) rose. The decline in single-family housing starts that took place in the South and in the West may partly reflect higher than average precipitation over the month of July. According to the National Oceanic and Atmospheric Administration, rainfall across the country was higher than normal in July, with parts of the South and the West experiencing the most rainfall in July relative to their normal levels. Despite the slight monthly decline in single-family housing starts, the underlying trend remains basically unchanged. On a three-month moving average basis, single-family housing starts were 597,000, 0.1 percent below its level in June.

In addition, the issuance of building permits, which can be an indicator of future building activity, rose 2.7 percent to a seasonally adjusted annual rate of 943,000 units in July. Single-family permits dipped 1.9 percent to 613,000 units from a strong pace in the previous month, while multifamily permits gained 12.6 percent to 330,000 units.

Regionally, combined permit issuance increased across the board in July, with gains of 1 percent, 2.8 percent, 1.1 percent and 7.1 percent in the Northeast, Midwest, South and West, respectively.




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