July Housing Starts Preview
June Housing Starts surged to 1.066mln, a 9.1% increase over the May data. June Building Permits, normally thought of as a forerunner to Starts, were up 11.6%. The surge in these data is very nearly all attributable to rule changes for permitting in New York City. The rush to get in under the implementation deadline drove June’s gains. Indeed, if not for the New York City rush, June would have recorded a 4% drop in Starts and only a 0.7% increase in Permits.
July Starts are expected at 960k and Permits are expected at 970k - a sharp return to the downtrend that has gripped the market since the high of 2.273mln Starts in January of 06. The June data was clearly indicative of urban building starts with the 5 units or more Starts jumping from 278k to 400k. Single Family Starts fell 36k, on pace with the 37k drop per month seen since June 2007.
Of interest in the tomorrow’s report will be the total number of Homes Under Construction; the June data, at 965k, was the lowest level since September 1998. Single Family Homes Under Construction, at 507k, was the lowest level since April 1993. Homes Under Construction has been dropping at an average rate of about 15k per month since June 2007. Back-of-the-envelope calculation brings these data to 492k tomorrow.
If no further distortions occur, expect that Starts and Permits will go back to trend with a muted market reaction.