Housing Fits And Starts – US-FOREX.US
Housing data this week were encouraging, with home building figures and industry sentiment measurements exceeding expectations, and some forecasters are straying into 2009′s heresy and calling bottoms for the national residential housing market.June housing starts unexpectedly rose to 582,000, the highest level since November of 2008, the U.S. Commerce Department reported Friday. The Street had forecast starts to slide to 530,000, from the 562,000 revised level recorded in May. The jump was driven by a 14.4% increase in single-family home construction, the fastest rate since December of 2004. The 470,000 total was also the highest level since October 2008, though still well below the peak in January of 2006.Building permits meanwhile rose by 8.7%, with multi-family home permits lifting 18.8%, and single-family permits moving up 5.9%. Overall homes still under construction fell by 3.4% to levels not seen since the early-90s, and single-family homes under construction slipped 1.9% to a record low of 312,000. Friday’s data come a day after the National Association of Home Builders/Wells Fargo Housing Market Index showed slight improvement in sentiment, lifting to 17 in July, up from 15 in June. Readings below 50 in the index indicate more builders view market conditions as poor rather than favorable. Michelle Meyer, an economist at Barclays Capital, called the week’s news encouraging, and reinforced her view that single-family starts are at a trough. Investors responded well to the data, as the SPDR S&P Homebuilders
exchange-traded fund rose 1.2%, or 15 cents, to 12.46. Housing stocks like KB Home
rose 2.3%, while Lennar
gained 1.9% and D.R. Horton
moved up 0.8%. Abiel Reinhart, an economist at JPMorgan Chase, argued the numbers suggest that the second quarter was the last in which there was a large drop in real residential investment spending. “Residential investment should turn about flat in this quarter, and a large increase in the fourth quarter is quite possible,” Reinhart said. “The housing starts report is also a positive indicator of new home sales.” Reinhart added that though the number of June home sales hasn’t been released yet, the fact that builders are increasing single-family permits and starts may mean that they are already seeing more gains in single-family sales.
The housing market still has a long road to recovery. For example, Anna Torma, homebuilder analyst at Soleil, pointed out that building permits, which lead housing starts, indicate that starts will decline in the coming months. She also noted the NAHB/Wells Fargo HMI sentiment for future sales was unchanged in July. The market also faces macroeconomic headwinds like rising unemployment, tight lending standards and the ongoing increase in foreclosures. “We believe the housing market will remain under pressure through 2009,” Torma said. “In 2010, we expect a shallow recovery in demand, with pricing remaining under pressure. However, we note that if we see an extended recession, the housing market could remain under significant pressure through 2010.”