Housing Starts Ease, But Permits Gain - December 19, 2012
Data on two key homebuilding metrics were issued earlier this morning, and taken as a pair, they indicated that the housing recovery is not only alive and well, but that it is gaining additional traction in most respects.
Specifically, the Commerce Department released figures for November showing that housing starts had backtracked just slight during the month, in spite of the impact from Hurricane Sandy, which struck the East Coast on October 29th, but whose ravages continued to restrain the afflicted areas well into November. In all, 861,000 housing units were started last month on an annualized basis. That was down from a downwardly revised 888,000 units in October. Initially, the October figure had been estimated at 894,000 homes started that month. Still, the 861,000 building rate was the second highest rate of this year, and compares well with the 708,000 homes started in November of last year.
At the same time, building permits, which are a more forward looking series, gained additional ground in November, coming in at an annualized run rate of 899,000 homes. That was up nicely from the October estimate of 868,000 homes, and was the best rate of such issuances so far this year. In fact, one has to go back to 2008, when the housing debacle was in full swing, to find a higher level of building permits. By comparison, in November of last year, just 709,000 permits were issued. The 27% year-to-year increase is dramatic evidence of this sector's re-emerging vigor.
On a region by region comparison, starts were down 5.2% in the Northeast, which was not surprising given the horrific impact within much of the region from the aforementioned monster storm. It should be noted that the Northeast is the smallest of the four housing markets across the country. At the same time, starts were up 3.3% and 2.9% in the Midwest and the South, respectively, while they were off 19.2% in the West.
As for permits, they were up for the month, overall, and ahead in all of the regions save for the Northeast, where they fell by 6.2%. The 5.9% gain in the West suggests that the sharp drop in starts in that region may have been a one-time event, and perhaps weather related.
Taken as a whole, this was a solid report, and excluding the weather impact in various spots, would have been an even better one. The nearly 900,000 rate of permits issued is likely to be the average rate of starts for the next several months, we surmise, which is almost double the rate of building at the trough of the cycle, but is still more than a third below the average level of construction in place during most years.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.