Tuesday, September 21, 2010

August Housing Starts

August Housing Starts


  • Housing starts rose 10.5% in August from 541,000 to 598,000. This was the highest level of new housing starts since the end of the homebuyer tax credit.
  • The Briefing.com consensus expected housing starts to increase a much more modest 1.7% to 550,000.

Key Factors

  • Even as homebuilder sentiment holds near its all-time lowest levels, builders remain bullish on housing demand.
  • Unfortunately, 600,000 new housing starts does not look like a new equilibrium level. Multifamily housing starts, which are extremely volatile, rose 32.2% in August after rising 36.0% in July. Typically, a rise above 20% in one month would bring a decline the next. Since the opposite occurred in August, we expect a substantial reversion in September.
  • Single-family construction increased 4.3% during the month -- the first monthly increase since April. We expect single-family construction to remain near its current level through the end of the year.

Big Picture

  • Housing starts are at extremely low levels and the outlook is not likely to improve any time soon due to high levels of inventories of unsold new homes.  An uptrend in construction will require an improvement in employment and income, and then take some time as inventories need to be reduced.

Starts 598K 541K 539K 588K 679K
  1 Unit 438K 420K 450K 459K 563K
  Multi Units 160K 121K 89K 129K 116K
Permits 569K 559K 583K 574K 610K

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