Housing Starts And Building Permits Miss By A Mile

 |  Includes: ITB, PKB, XHB
by: Bespoke Investment Group

This morning's releases of Housing Starts and Building Permits for the month of December both missed expectations by a wide margin. While economists were expecting Housing Starts to come in at a level of 950K, the actual level came in at 880K. In the case of Building Permits, January's level came in at 937K, which was 38K below the consensus forecast of 975K. While a big deal has been made of the fact that starts missed estimates by 70K, we would note that in just the last ten months, January's miss was only the third worst.

The table below breaks down January's housing reports by type of unit and on a regional basis. In the case of Housing Starts, we saw similar declines in percentage terms of both single and multi-family units. For Building Permits, however, most of the decline was in multi-family units (-12.1%) while single family units only declined by 1.3%. Single family units are typically considered to have more of a positive economic impact than multi-family units, so the fact that single family units held up better is a slight silver lining in what was a pretty gray report.

The regional breakdown of today's Housing Starts report was a bit puzzling (see charts below). Weather has been a popular scapegoat for the weakness in today's Housing Starts report, and if you look at the 67.7% decline in the Midwest during January it would certainly support that argument. In fact, at just 50K on a seasonally adjusted basis, January Housing Starts in the Midwest were at their lowest level in a single month on record (since 1959). However, while starts in the Midwest were down sharply, starts in the Northeast rose by 62% to 136K. This is the highest monthly reading for the Northeast since July 2008. So while there is definitely some evidence of weather playing a role, it is not overwhelming.

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