Housing Continues to Rebound - September 19, 2012
The housing market continues to rebound, with the latest evidence of this long-awaited comeback being provided by reports from the U.S. Commerce Department on housing starts and building permits for August. These issuances were released at 8:30AM (EDT) this morning.
Specifically, Commerce reported that housing starts had edged up in August to an annualized rate of 750,000 homes. That was 2.3% better than the downwardly revised 733,000 starts total seen in July of this year. (Initially, starts had been estimated at 746,000 in July.) On a year-to-year basis, though, the gains were dramatic, with starts fully 29.1% above the comparable figure from August of 2011. In all, this was the second best level of starts in more than two years. Indeed, save for the June level of 754,000 starts, we need to go back to 2010 when housing was being temporarily propped up by tax credits to get a better level of building.
All told, the latest figure of 750,000 annualized starts was, as noted, a bit better than the 733,000 level in July. Meanwhile, the construction of single-family homes, which made up 71% of total housing starts last month, rose 5.5% in August to 535,000 units. That was the highest level since April of 2010, when the market was boosted by the aforementioned tax credits. The year-to-year gain in this key sector was 27%.
Even so, the latest aggregate total of 750,000 homes was still a bit less than the consensus forecast increase to 765,000 homes. In the meantime, the latest total was just about half the average level of 1.5 million homes built a year over the past half century. So clearly, there is a long way to go before this still-depressed economic category is fully on the mend.
At the same time, the number of permits issued for future building eased back slightly in August to an annualized rate of 803,000 homes. That was a tad above the consensus expectation for permits of 800,000. However, the total was incrementally below the July number of 811,000 building permits, but was also the second highest level of the year. By comparison, permits were at the 645,000 level in August of last year. In September of 2011, just 616,000 permits were issued. Thus, next month's year-to-year matchup should be highly positive.
The better news on the building front seen this morning was anticipated yesterday by a report from the National Association of Homebuilders, which said that builders' confidence had risen to its highest level in six years in September. That survey underscored the definite comeback now under way in this sector.
However, the comeback must be kept in some perspective. First, building levels are well down from where they were in 2006, when an average annual rate of more tha two million homes was being started. Also, employment levels are still low and that presents a challenge to the recovery now in place. Also, lending standards are still tight. Finally, the Federal Reserve remains concerned, as is evidenced by its issuance of the QE3 monetary easing program last week.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.