Housing Starts Surged 15.7% in July

 
Implications: Great news on home building. Housing starts boomed in July, soaring 15.7%, and were revised up substantially for June. The upward trend should continue. Building permits also soared in July, up 8.1%, as single-family and multi-family permits rose 0.9% and 21.5% respectively. Starts can be volatile from month to month, so to find the underlying trend we look at the 12-month moving average, which now stands at the highest level since October 2008. The total number of homes under construction, (started, but not yet finished) increased 2.9% in July and are up 22.8% versus a year ago. No wonder residential construction jobs are up 116,000 in the past year. Multi-family construction is taking the clear lead in the housing recovery. Single-family starts have been in a tight range for the past two years, while the trend in multi-family units has been up (although volatile). In the past year, 35% of all housing starts have been for multi-unit buildings, the most since the mid-1980s, when the last wave of Baby Boomers was leaving college. From a direct GDP perspective, the construction of multi-family homes adds less, per unit, to the economy than single-family homes. However, home building is still a positive for real GDP growth and we expect that trend to continue. Based on population growth and "scrappage," housing starts will eventually rise to about 1.5 million units per year. In other recent housing news, the NAHB index, which measures confidence among home builders, rose two points to 55 in August, the best reading since January. Looks like a broad pick-up in both sales and foot traffic around the country.

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Posted on Tuesday, August 19, 2014 @ 9:47 AM

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.