Housing starts measure initial construction of residential units (single-family and multi-family) each month. A rising (falling) trend points to gains (declines) in demand for furniture, home furnishings and appliances. Why Investors Care
| Released on 1/18/07 For Dec 2006 | |||||||||||||||||||||||
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Highlights
Housing is rebounding sooner than expected--perhaps helped by unseasonably warm weather. Housing starts jumped 4.5 percent in December, following a 6.4 percent rebound in November. Starts in December rose to an annualized pace of 1.642 million units from the revised 1.572 million units for November. The December figure came in well above the market expectation of a 1.59 million unit pace, compared to the initial estimate of 1.588 million units annualized for November. On a year-on-year basis, starts are down 24.7 percent in December, compared to down 28.6 percent in November.
Housing permits rebounded 5.5 percent in December after a 2.6 percent decline in November. Permits stood at a 1.596 million unit pace in December, compared to1.513 million units in December. Permits are down 24.3 percent year-on-year in December, versus down 30.9 percent in December.
December's rise in starts was led by the multifamily component as single-family starts fell. Single-family starts declined 4.1 percent in December, following an 8.0 percent rebound in November. Multifamily units soared 42.1 percent in December, following a 0.3 percent down tick in November.
Regionally, starts were strongest in the Northeast with a 25.6 percent spike. Gains were also seen in the West, up 12.4 percent, and in the Midwest, up 1.8 percent. Starts in the South declined 2.0 percent. In the Northeast, multifamily starts surged 42.9 percent in December -probably due to relatively favorable weather.
Today's report probably should be discounted somewhat given that seasonal factors are very large during winter months and warm or dry weather can cause a temporary spike in seasonally adjusted data. Nonetheless, the number suggests that housing either has bottomed or is near bottom. Bonds will not like the data as this puts off Fed easing. Equities should like the rebounding economy but that might be outweighed by the delay in Fed easing.
Housing starts rebounded 6.7 percent in November, following a 13.7 percent drop in October. November's gain occurred despite still too high inventories to sales for both existing and new homes for sale. Most likely the November firming in starts was somehow a seasonal aberration, given that pending home sales have not yet strengthened to give homebuilders enough confidence to boost speculative building and current demand simply is not yet on the upswing - though it might be in a few months.
Housing starts Consensus Forecast for December 06: 1.59 million-unit rate
Range: 1.50 million to 1.62 million-unit rate
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Monthly figures are often volatile; housing starts fluctuate more than many indicators. According to the Commerce Department, it takes six months for total housing starts to establish a trend. Consequently, we have depicted total starts relative to a six month moving average. |
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