Implications: After a large gain in February, housing starts pulled back in March, falling well short of consensus expectations. However, in spite of the 8.8% drop in March to a 1.089 million annual rate, housing starts are still up 14.2% from a year ago, powered by a surge in single-family units. We believe the housing recovery is still alive and well and the trend will be higher in the months and years to come. The rapid gain in single-family starts over the past year 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 recently accelerated. This doesn't mean multi-family construction is declining for good, just that it will likely grow more slowly from here as single-family construction grows more quickly. To help get rid of the monthly volatility in overall starts, we look at the 12-month moving average, which is the highest since 2008. Meanwhile, although permits slipped in March, they're still up 4.6% versus a year ago while single-family permits are up a strong 13.2%. 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 April. Readings greater than 50 mean more respondents report good market conditions. One year ago, the overall index was at 56. It won't be a straight line higher, but expect the housing sector to keep adding to real GDP growth in 2016.
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