The detractors of the real estate market have enjoyed complaining about the downturn for about as long as they had bought into the bubble. No matter what I say or write, they will continue to point to every negative factor that weighs on the housing market. Only when growth materializes and it is announced and reconfirmed within the popular press will the naysayers change their tune. Well, voila! I present housing growth!
Thursday’s release of the May Housing Starts data - (pdf) offered a clear message; it was a message of transition. That’s because as you look across the data points within the government’s release, from past to present to forward looking, there is a clear trend illustrating improvement. First, let’s examine the past. Housing Completions posted only a slight increase of 0.4% over April, to an annual rate of 544K. Still, Completions were dramatically (22.5%) lower than last year’s comparable period. So there was little month-over-month growth and significantly deteriorated year-over-year change, thus feeding the fodder of the housing hounds, who I am sure are thrilled to be the theme of this article (looking forward to your comments friends). We should note that single-family completions (excluding multi-family structures) increased 2.9% over April. Thus, even in the past activity we see the beginnings of growth as it materializes in sequential month comparisons.
As we move into the present, examining Housing Starts, we see 3.5% monthly growth to a rate of 560K in May. Not only did Housing Starts exceed April’s pace, but they exceeded the economists’ consensus estimate for 547K starts as well. That said, it’s the yearly comparisons that the hounds holler about, and Starts were still 3.4% below the prior year rate of 580K. You’ll recall that last year’s activity got a boost from the First-Time Homebuyer Tax Credit, which I’m sure you are getting tired of hearing about. Well, good news, the tax credit will no longer come into play moving forward. Likewise though hounds, housing growth will begin on a year-over-year basis. Before we move forward to the latest evidence that this prediction is coming true, we should note that single-family housing starts rose 3.7% above April’s rate.
This is the best news of all. Housing units authorized by permits, which represent future housing starts and the revival of the housing market, increased 8.7% in April to an annual rate of 612K. Permits for single-family homes also increased by 2.5% to 405K in April. Now, unlike with Starts and Completions, permitting activity improved 5.2% over May of 2010. Voila! Housing growth!