Econ Wrap-Up: Housing Permits & Starts

Includes: ITB, PKB, XHB
by: Jenny Coombs

By Jennifer Coombs

On June 16th, there was one very important reading that compliments the strong data from the National Association of Homebuilders (NAHB) builder confidence index. While the headline is a bit deceiving, the housing starts and permits data for the month of May points to a very strong recovery in the US housing sector. Housing starts for the month came in at a seasonally adjusted annual rate (SAAR) of 1.036 million, which is down 11.1% from April, however the April rate which was already a reading for the record books, was revised even higher to 1.165 million.

The revision resulted in a whopping 22.1% gain over March - no, that's not a misprint. Sealing the deal for this report is another massive surge in housing permits, which jumped 11.8% to a SAAR of 1.275 million after a 9.8% gain in April. This is one report that is sure to have economists revising the Q2-2015 gross domestic product (GDP) estimates, and the reading for the Conference Board's Index of Leading Economic Indicators (LEIs), even higher. Permits are the biggest indicator in the report, and the latest rate is the best in nearly eight years!

Gains are concentrated in the Northeast and Midwest, which are actually the two smallest US housing regions. When it comes to starts, the monthly decline is spread out across all four regions. This is one big tick in the pros column for the US housing sector, as well as the overall economy. Many suspected that the space would recover following a first quarter that was very depressed by severe winter weather. On the other hand, this is another major point of contention for the hawks in the Fed, and we expect Janet Yellen to discuss the gains in housing in her speech on Wednesday, June 17th.