Implications: Home building continues to be a bright spot for the US economy. After a large gain in April, housing starts were basically unchanged in May, declining 0.3%, but beating consensus expectations. Housing starts are now up 9.5% from a year ago and are clearly in an upward trend, with improvement in both single-family and multi-family construction. To help get rid of the monthly volatility, we look at the 12-month moving average, which is the highest since 2008. Within that upward trend, we're seeing a better "mix" of home building. When the housing recovery started, multi-family construction 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 and single-family building is starting to climb more quickly. This trend should continue. Single-family building permits are up 4.8% from a year ago while multi-family permits are down 28.1%. The shift in the mix of homes toward single-family units is a positive because, on average, each single-family home contributes to GDP about twice the amount of a multi-family unit. 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. It won't be a straight line higher, but expect the housing sector to keep adding to real GDP growth in 2016-17. In other recent housing news, the NAHB index, which measures sentiment among home builders, rose to 60 in June, the highest level since January. More jobs and faster wage growth are making it easier to buy a home and builders are responding.
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