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Economy in Brief

U.S. Housing Starts Post A Surprising Gain During June
by Tom Moeller July 17, 2009

Perhaps this is the convincing sign that housing activity has turned the corner from its dramatic decline. Housing starts increased to 582,000 (AR) units last month versus 562,000 starts during May which was revised up from 532,000. The latest figure greatly exceeded Consensus expectations for 528,000 starts.

Higher starts of single-family homes led the increase in the total last month. The 14.4% m/m rise was the fourth consecutive monthly increase. The gains have been off the record low for the series which dates back to 1959 and the latest level was down three-quarters from the peak in early-2006. During the last ten years, there has been an 84% correlation between the q/q change in single-family starts and their contribution to quarterly GDP growth.

Starts of multi-family homes fell to 112,000 and reversed slightly more than half their gain during May. Starts of apartments, condominiums & town houses remained down by roughly two-thirds from the 2006 peak.

By region increases in starts of single-family units last month spread across the country. Single-family starts in the Midwest rose 26.4% to their highest level since October (-18.0% y/y). In the Northeast, single-family starts also firmed after two months of decline and rose to the highest level this year (-42.4% y/y). Starts in the West rose for the fourth straight month (-22.2% y/y) and in the South single-family starts rose a lesser 8.1% m/m. It was the third straight monthly gain (-34.0% y/y).

Overall, building permits during June remained near the record low. Though the latest gain was the second in a row and to the highest level this year, it still left permits slightly lower than at yearend. Overall, permits were down by roughly one-half from last May. As with starts, recent gains in building permits have been led by higher single-family permits. Single-family permits, a leading indicator of starts, were stronger than the total and rose for the third straight month. They were up 16.2% since December (-28.9% y/y). Permits to build multi-family units rose 18.8% but only after eleven straight months of decline (-76.6% y/y).

The housing starts figures can be found in Haver's USECON database.

Strong Medicine for an Ailing Economy from the Federal Reserve Bank of Atlanta is available here.

Productivity Swings and Housing Prices from the Federal Reserve Bank of New York can be found here.

Housing Starts (000s, SAAR) June May Y/Y 2008 2007 2006
Total 582 562 -46.0% 900 1,342 1,812
Single-Family 470 411 -28.2 616 1,036 1,474
Multi-Family 112 151 -73.5 285 306 338
Building Permits 563 518 -52.0 895 1,392 1,844
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