Building Permits and Housing Starts are Down and the Number Collecting Unemployment is Up - So Where is the Recovery?
The US Media keeps calling a bottom with a recovery starting in the second half of the year. With the building permits and housing starts down and the number collecting unemployment up someone needs to point out how we get to the recovery in 6 months or so. Text in bold is my emphasis. From Market Watch:
Building permits fell to a record-low level in March and construction on new homes dropped sharply again after a big gain in February had raised hopes of a recovery, the Commerce Department estimated Thursday.
Housing starts fell 10.8% in March to a seasonally adjusted annual rate of 510,000 from 572,000 in February. It's the second-lowest rate since the 1940s. January's 488,000 pace remains the post-war low.
Barron's Senior Editor Steven M. Sears examines why "April is the cruelest month", as certain popular sentiment indicators are declining even as some of the macro-measures that drove the rally - like good earnings clarity and guidance - seem to be fading away.It was much weaker than the 550,000 annual rate expected by economists surveyed by MarketWatch.
Meanwhile, building permits dropped 9% to a 513,000 seasonally adjusted annual pace, the lowest on record. Permits for single-family homes fell 7.4% to a 361,000 annual rate, the second-lowest on record.
"The drop in permits takes some luster off the relatively better news we had been seeing in housing, but a bottom may still be near," wrote Adam York, an economist for Wachovia. "We think a bottom for construction activity could come by summer, near or just below the half-million unit mark."
Starts are down 48% in the past 12 months and are down 78% from the peak three years ago. Starts are down 51% in the first three months of the year compared with the same period last year. In all of 2008, 905,000 homes were started.
Building permits are down 45% in the past year.
The large increase in housing starts in February, which has now been revised down to 17% from the 22% gain originally reported, was lauded by policymakers from Ben Bernanke to Barack Obama as a tentative sign that the pace of economic decline might be easing.
In a separate report, the Labor Department said initial jobless claims plunged by 53,000 to 610,000 last week, the lowest since January, potentially another "green shoot" of hope.
However, the number of people collecting unemployment checks surged by 172,000 to 6.02 million, another record high.
The drop in housing starts in March was entirely due to the volatile multifamily sector, which fell 29% in March after rising 62% in February. Starts for single-family homes were unchanged in March at a 358,000 rate, just above the record-low of 356,000 set in January.
With single-family starts steady at a very low level over the past three months, "the residential real estate sector may be starting to stabilize," wrote Michelle Girard, an economist for RBS Securities. "Of course, a meaningful upturn in home building will not be seen until inventory levels (which remain bloated) have been significantly reduced."
The inventory of homes on the market is likely to rise in coming months, as lenders have resumed foreclosures, said Richard Moody, chief economist for Forward Capital. "Any rebound in new residential construction will remain muted into 2011," he said.
The mood of home builders improved in April, but remained gloomy. The National Association of Home Builders reported Wednesday that its sentiment index rose from 9 in March to 14 in April on a scale of 1 to 100. See full story.
The government cautions that its monthly housing data are volatile and subject to large sampling and other statistical errors. In most months, the government can't be sure whether starts increased or decreased. In March, for instance, the standard error for starts was plus or minus 11.6%. Large revisions are common.
It can take four months for a new trend in housing starts to emerge from the data. In the past four months, housing starts have averaged 532,000 annualized, down from 568,000 in the four months ending in February.
Housing completions rose 3.5% in March to an annual rate of 824,000.
The number of new single-family homes under construction fell to a record low 351,000.
Housing starts rose 6.3% in the Northeast, rose 15.9% in the Midwest, fell 16.8% in the South and fell 26.3% in the West.