Housing Starts Continue Improvement

January housing starts increased 1.5% to 699,000 on a seasonally-adjusted annual basis. The relatively small month-to-month increase was masked by a substantial revision to November and December estimates. With the revisions, total starts rose to 702,000 in November from a previously reported 685,000. November is the first month above 700,000 since October 2008.
Single-family starts were down 1% on a month-over-month basis but also because December was revised up 9%. Single-family starts broke 500,000 for the first time since the home buyer tax credit was in effect in early 2010. Multifamily starts increased 8.5% to 191,000.
Housing permits also improved modestly across building types but were mixed across regions. Total permits rose in the Northeast and South 4.2% and 10.1% respectively but fell in the Midwest and West 3.7% and 18.2% respectively. The West decline was in multifamily permits.
The improvement in construction and permits aligns with improvements in other housing indicators including the NAHB/Wells Fargo Housing Market Index, which has risen 15 points in five months and the NAHB/First American Improving Markets Index, which has risen from 12 markets to 98 markets in five months.
Indicators outside housing such as employment and consumer confidence have also shown improvement. The consistency of improvement across different measures and within a measure across time is encouraging and supports the expectation for continued modest growth.
But caution remains and one indicator is the number of single-family homes completed, which dropped 14.9% in January to 389,000 on an annual basis from 446,000 in 2011. The drop was consistent across all regions. January experienced better than normal weather in terms of less rain and warmer temperatures so if anything that should have increased the rate of completions. It is possible that builders are waiting to apply the final finishes until a sales contract is signed and the buyer can make those choices.


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