Briefing.com: Housing Starts

Updated: 17-Feb-10 08:56 ET

January Housing Starts

Updated: 17-Feb-10 08:56 ET

Highlights

Housing starts exceeded expectations as the number of starts rose from 575,000 in December to 591,000 in January.
The consensus estimate called for an increase to only 580,000.
Building permits met expectations as the number of issued permits fell from 653,000 to 621,000.

Key Factors

Even more impressive was that December’s numbers were revised higher from 557,000 to 575,000 starts. All of the revision came in the single-family sector as new starts were revised up from 456,000 to 477,000.
We thought that last month’s starts data suggested builders were waiting on new construction until they get a better feel for how the market is going to react without government assistance. January’s data, along with December’s revisions, suggest builders believe demand will remain stable.
The decrease in permit applications does not necessarily mean starts will fall in the future. Since the start of the housing contraction in 2006, there has been a disconnect in the correlation between new permits and new construction.

Big Picture

Housing starts are at extremely low levels and the outlook is not likely to improve any time soon due to high levels of inventories of unsold new homes. An uptrend in construction will require an improvement in employment and income, and then take some time as inventories need to be reduced. Government action to boost mortgage seems to have helped, and starts have begun to stabilize.