Mixed Housing Data Following Weaker Home Builder Sentiment

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

After a weaker than expected reading on home builder sentiment to kick off the week, data on Housing Starts and Building Permits for the month of January came in mixed with a negative bias. As shown in the table above, starts missed by 74K on a seasonally adjusted annualized rate, while permits came in slightly higher than expected. For both reports, though, we would note that December's readings were revised lower.

The charts below show historical levels of Housing Starts and Building Permits since 2005, and for both series, current levels are off their cycle highs from last summer. That being said, on a 12-month average basis both series hit new cycle highs this month.

The table below breaks down this month's report by the size of unit and region. For Housing Starts, February's levels were down across the board, and with the exception of the Midwest were all down by similar amounts. On a y/y basis, January's readings were more mixed, where single-family units increased while multi-family units declined. On a regional basis, starts in the Northeast surged 44%, which is what happens when you go from one of the most severe winters in decades to one of the warmest. Meanwhile, out West where the weather has been more severe this year than last, starts dropped 15.7%.

In terms of Building Permits, m/m readings were relatively modest in terms of single versus multi-family units. On a regional basis, though, there was a wide disparity between the Northeast, where permits plummeted by 55.4%, and the rest of the country, where we saw gains. The 55% m/m declines in starts for the Northeast was the third largest monthly decline on record (going back to 1960), but it followed December's 57% m/m increase, which was the fifth largest m/m increase on record, so in effect, the two cancel each other out.

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