Just when pessimism was beginning to creep into the economic outlook following the issuance early this week of uninspiring results for retail sales during April, and a subsequent dour report released yesterday on industrial production and factory usage during the same month, the government has just released data showing sharp increases in housing starts and building permits in April on a month-to-month basis.
Specifically, starts jumped to a seasonally adjusted rate of 1.072 million annualized units last month. That was 13.2% above the upwardly revised March starts total of 947,000 houses. The latest total was notably above the April, 2013 level of 848,000 starts. It would seem that the recovery from the long and arduous winter has begun--at least as far as homebuilding is concerned.
Also, building permits increased last month. In all, this more forward-looking metric jumped to a seasonally adjusted annual rate of 1.08 million homes authorized for upcoming construction. That was ahead of the 1.00 million unit run rate booked in March. A year ago, such permits had totaled 1.04 million units. Thus, there was not much improvement on a year-over-year basis. It should be noted that building permits, however, that save for a sharp reversal in January of this year, have generally held up well in the past year.
As to building permits, which as noted are a more forward-looking barometer, and so a more critical gauge of building strength than starts, the latest month's total was the highest in several years. But it should also be considered this was the third month in a row that permits had totaled at least one million units. It also was the sixth month in the past seven that this has been the case.
However, things have not been as consistent in actual starts. Here, the latest total was the best since last November, but it was only the third time in the last year that starts had totaled more than one million units annually. As to the winter's impact, housing starts had totaled just 897,000 units, 928,000 homes, and 947,000 residences in January, February, and March, respectively. So, there is some catch up to be done.
Breaking the report down by region, we see that starts surged by 28.7% in the Northeast and by 42.1% in the Midwest. These are, respectively, the smallest and second smallest regions of the country. Starts, meantime, were up just 1.5% in the South last month, which is the largest locale, while such activity was up by 11.1% in the West. It should be noted that the weather's impact in these latter areas was much less severe than in the Northeast and the Midwest.
Looked at in its entirety, this was an excellent and reassuring report. True, with mortgage rates and pricing both now somewhat higher, affordability is once more a concern, albeit a modest one. Finally, we shall soon see if the weather's impact is running its course on the home sales front, as reports will be issued on sales of existing homes next Thursday and new homes to close out the upcoming week on Friday.
At the time of this article's writing, the author did not have positions in any of the companies mentioned.