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 9/17/08 For Aug 2008 | |||||||||||||||||||||||
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Highlights
Housing starts in August continued its downward spiral as tight credit and bloated supplies of unsold homes continue to depress new construction. Starts fell 6.2 percent, following a 12.4 percent drop in July. The August pace of 0.895 million units annualized was down 33.1 percent year-on-year and fell short of the market forecast for 0.950 million units. The decrease in starts was led by multifamily starts, which dropped 15.1 percent, after a 28.7 percent fall in July. Single-family starts also declined but at a much more moderate pace, decreasing 1.9 percent in the latest month, after dropping 3.2 percent in July.
By region, the drop in starts was led by a monthly 14.5 percent decline in the Northeast with the Midwest and South also declining, by 13.6 percent and 7.4 percent, respectively. The West rebounded 10.8 percent.
Permits also declined in August, falling 8.9 percent, following a 17.7 percent decrease in July. August's 0.854 million unit pace for permits was down 36.4 percent year-on-year.
Today's report shows further deterioration in the housing sector. Equities will not like the news but bonds should. The further decline in this sector will give next week's existing and new home sales reports even more attention. The latest starts numbers also point to a decline in the residential investment component of third quarter GDP.
Housing starts may return to a more normal pattern in August after heavy volatility in June and July. Starts in July fell sharply as expected after an artificial boost in the multifamily component in June. Starts fell 11.0 percent, following a 10.4 percent surge in June. But July's level in starts was a return to more normal conditions after a change in building code in New York City -- taking effect July 1 -- led to a run on both multifamily permits and multifamily starts to grandfather in the less restrictive code. The July pace of 0.965 million units annualized was down 29.6 percent year-on-year. Single-family starts in July continued their downward spiral, falling 2.9 percent after declining 3.2 percent in June. Unfortunately, there has been no change in the fundamentals to suggest a bottoming in starts yet. Unsold inventories of new and existing homes are still extremely high.
Housing starts Consensus Forecast for August 08: 0.950 million-unit rate
Range: 0.900 million to 1.000 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. |
| 2008 Release Schedule | ||||||||||||||||||||||||||
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