While we are have been continually bombarded by negative press on the continued weakness in the housing market, a funny thing has happened: housing has stabilized and begun to grow.
This morning, the Census Bureau released its monthly housing starts and permit data for the month of April. Among the finding were (author opinion/summation in italics):
- Privately-owned housing units authorized by building permits in April were at a seasonally adjusted annual rate of 715,000.
This is 7.0 percent (±1.0%) below the revised March rate of 769,000, but is 23.7 percent (±1.9%) above the revised April 2011 estimate of 578,000. While down from the prior month, the trend in permits has been upwards, showing that, while still somewhat weak, housing has begun to recover. Weakness was across all regions, with MOM changes weakest in the Midwest (-12.3%) and West (-13.9%) and YOY changes highest in the Northeast (+32.8%) and the West (+29.8%).
- Privately-owned housing starts in April were at a seasonally adjusted annual rate of 717,000. This is 2.6 percent (±14.8%)* above the revised March estimate of 699,000 and is 29.9 percent (±15.2%) above the revised April 2011 rate of 552,000. Starts have shown a continued upward trend as well (although the +- variablility is large), showing that permits are working their way through the process. The Northeast showed considerable MOM weakness (-20.7%), while the Midwest showed the most strength (+11.6%). On a YOY basis, the Midwest (+32.3%) and South (38.5%) showed the strongest growth.
- Privately-owned housing completions in April were at a seasonally adjusted annual rate of 651,000. This is 10.0 percent (±16.7%) above the revised March estimate of 592,000 and is 20.1 percent (±18.0%) above the revised April 2011 rate of 542,000. This is where the rubber meets the road. Housing that has worked its way through the process (permitting, starting, building then completing) is showing increased strength.
Housing is showing signs of growth, or in the worst case it is coming off the bottom. While there is still a significant shadow inventory on the books of the banks, real estate is showing signs of life - which further supports economic recovery (granted, other factors are offsetting housing).
Total permits on both an absolute an YOY basis are showing strength.
Despite the renewed emphasis on multifamily and the demographic shift in the owning/renting mindset of 20-34 year olds, smaller multifamily units are growing, but not as much as many would think.
Five plus unit permitting is where the growth is located. The demographic shift referenced earlier is reflected in the continued strength in five plus unit permitting. Keep your eye on the ball with this as supply works its way through the process.
Given the slow upward grinding of absolute starts and the strength in YOU starts, housing is showing traction as shovels hit the ground.
Bottom Line: Real estate and housing continues to show signs of life despite the negative press which would often infer otherwise. While I still have concerns about bank owned real estate coming off their books in response to the growth, I believe that banks will slowly release their housing/real estate stock on the market so as not to push the market down.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.