Housing Starts Drop In January

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

By practically all accounts out there, this morning's release of housing starts for the month of January were very bad. While economists were expecting starts to come in at an annualized rate of 920K, the actual level was considerably weaker at 890K. While the starts number was weaker, building permits actually managed to come in slightly better than expected at a level of 925K versus forecasts for an annualized rate of 920K.

In the charts below, we show the historical levels (left side) and year/year change in housing starts going back to 1962. We also break out the Starts reading based on single family and multi-family units. Even after this month's decline, housing starts were still up 23.6% y/y in the month of January. Even more interesting is the fact that while the overall rate of housing starts declined, single family units actually increased by 5K up to 613K. Throughout the recovery in housing the last several months, the biggest complaint has been that much of the increase has been in multi-family units. With today's report, we actually saw some strength in single family units, yet no one seemed to care.

Like the charts above with housing starts, the charts below are set up the same way with building permits. Here, we saw a pick up in both the single and multi-family measurements. On a year/year basis, overall building permits increased 35.2% from last month's rate of 29.7%. For single-family units, starts increased at a y/y rate of 29.2% versus December's rate of 26.2%. Finally, for multi-family units the y/y change in starts increased from 36.0% to 47.0%.

Overall, today's weaker than expected housing starts report may not have been anything to get excited about, but to say that this report marks a new leg lower in the US housing market is a bit of a hyperbole.