Implications: Housing starts bounced back in February, showing the housing recovery is alive and well. Housing starts rose 5.2% in February to a 1.178 million annual rate. Single-family starts led the way, accounting for almost all of the gain. Single-family starts are up a whopping 37% from a year ago, and are now the highest since 2007. The more rapid gain in single-family starts is important because, on average, each single-family home contributes to GDP about twice the amount of a multi-family unit. Since the housing recovery started, multi-family construction has generally led the way. The number of multi-family units currently under construction is the highest since the early 1970s. But the share of all housing starts that are multi-family appears to have peaked last year as single-family building has accelerated. This doesn't mean multi-family construction is declining, just that it will likely grow more slowly from here as single-family construction grows more quickly. We can also see that shift in data on housing permits. Although permits slipped in February, they're still up 6.3% versus a year ago while single-family permits are up a strong 16.8%. We expect housing to continue to be a bright spot in 2016-17. Based on population growth and "scrappage," housing starts should rise to about 1.5 million units per year, so a great deal of the recovery in home building is still ahead of us. In other recent housing news, the NAHB index, which measures confidence among home builders, remained unchanged at 58 in March. Readings greater than 50 mean more respondents report good market conditions. One year ago, the overall index was at 52. Overall, housing continues to move higher. Even with higher mortgage rates, expect the sector to keep adding to real GDP growth in 2016.
Click here for PDF version