Housing starts rose 2.6% in April to 717,000 units at an annual rate, well above consensus

Implications: The recovery in home building is definitely underway. Housing starts rose 2.6% in April to 717,000 units at an annual rate and are up 29.9% from a year ago. In addition, March housing starts were revised substantially higher from 654,000 to 699,000 units at an annual rate. The total number of homes under construction (started, but not yet finished) increased for the eighth straight month, the first time this has happened since 2004-05. Permits to build homes, although declining 7.0% in April, are up 23.7% from a year ago. Some people may see the April decline as a sign of weakness, but this weakness was all focused in multi-family permits which fell 20.8% in April after a 32.3% rise in March. Single-family permits actually rose 1.9% in April and are at the second highest level in two years, signaling continued gains in home building in the coming year. It looks like the second quarter of 2012 will be the fifth straight quarter where home building boosts real GDP. Multi-family activity – both starts and permits – has been leading the way and we expect that to continue, particularly now that a legal settlement means more foreclosures can move forward. Some people occupying homes they have not been paying for will now have to go elsewhere and rent. Based on population growth and "scrappage," housing starts should eventually rise to about 1.5 million units per year (probably by 2016), which means the recovery in home building is still very young. For more on the housing market, please see our research report (link).

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Posted on Wednesday, May 16, 2012 @ 10:32 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.