Much Needed Positive Housing Start Report

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A much needed positive housing start report was released today by the the U.S. Census Bureau, after 3 straight months of declining starts. The Census Bureau reported  that there were 1,2540,000 housing starts in June. The starts numbers for the previous month, which were negative, were revised higher to 1,168,000. Housing starts and new home sales data vary significantly month to month so revisions are key to understand the data trends.

June ‘17 building permits up 7.4% to 1,254,000 (annualized). Starts up 8.3% to 1,215,000.

 

Housing Starts:

Privately-owned housing starts in June were at a seasonally adjusted annual rate of 1,215,000. This is 8.3
percent (±15.8 percent)* above the revised May estimate of 1,122,000 and is 2.1 percent (±14.0 percent)*
above the June 2016 rate of 1,190,000. Single-family housing starts in June were at a rate of 849,000; this is
6.3 percent (±13.5 percent)* above the revised May figure of 799,000. The June rate for units in buildings
with five units or more was 359,000.

Building Permits:

Privately-owned housing units authorized by building permits in June were at a seasonally adjusted annual
rate of 1,254,000. This is 7.4 percent (±1.1 percent) above the revised May rate of 1,168,000 and is 5.1
percent (±1.4 percent) above the June 2016 rate of 1,193,000. Single-family authorizations in June were at
a rate of 811,000; this is 4.1 percent (±0.8 percent) above the revised May figure of 779,000.
Authorizations of units in buildings with five units or more were at a rate of 409,000 in June.

The theme of slow and steady growth in housing continues to be supported by the data.  As along as single family starts keep growing we should expect to see increased housing demand as demographics for housing improve in the coming years.

Single family starts are up 7.9% year to date and 10.3% year over year while multifamily starts are down 13% year over year. As we can see below the boom in Multifamily starts has cooled and rent inflation has started to decline as supply has caught up with demand. 

From Calculated Risk:
http://www.calculatedriskblog.com/2017/07/housing-starts-increased-to-1215.html

StartsShortJune2017 (1) 
From BLS:

JULY RENT INFLATON 2
I don’t expect that we will reach the 50 year moving average for housing starts in this cycle, that being from 2008-2019. We simply don’t have the demand from new home sales to warrant the building boom that occurred as the result of the over investment in housing that we had in the previous cycle. However,  in years 2020-2024, starts should noticeably improve.

With all housing starts and new home sales data, context is key to understanding the trends. 

From Doug Short
https://www.advisorperspectives.com/dshort/updates/2017/07/19/new-residential-housing-starts-up-in-june11c480dad3116f2d88065aebf81082f5

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Also from today’s government data.

Second quarter median weekly earnings for all full time workers running at +4.2% year over year. This is the best growth in the cycle.

https://www.bls.gov/news.release/wkyeng.t01.htm

JULY FULL TIME YOY EARNINGS

Logan Mohtashami is a financial writer and blogger covering the U.S. economy with a specialization in the housing marketLogan Mohtashami is a senior loan officer at AMC Lending Group,  which has been providing mortgage services for California residents since 1987. Logan also tracks all economic data  daily on his own facebook page https://www.facebook.com/Logan.Mohtashami