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By the Numbers

Featuring brief segments of economic analysis from our senior economist Michael Bazdarich, PhD.

The economic analysis we previously featured in By the Numbers is now available on the Western Asset Blog. This page will no longer be updated.

August Housing Starts Data Down but Still Strong

Housing construction looks to have declined in August, but only very slightly and only from elevated levels. We focus on single-family construction, and starts there were -3.0% in August, with a -2.6% revision to the July level. Still, as the accompanying chart shows, the trend for single-family starts still looks pretty clearly to be up since the fall of 2014. Single-family permits are a bit more stable than starts, and these too continue to trend upward, though they have not yet reached levels that would support recent starts levels.

The story was similar for multi-family housing. There, starts also dropped 3.0% in August, following a scary-sounding 23.9% decline in July. It has been widely reported that multi-family starts surged in June thanks to the then imminent expiration of special tax breaks in New York state. The July drop—and possibly the August one as well—was mainly a reversal of that temporary spike, and in multi-family construction, too, even the recent declines leave starts and permits well above the levels of early-2015 and before.

We’ve been skeptical of the staying power of this year’s housing upturn. Home buying still appears to be dominated by investor demand rather than “grassroots” owner-occupants, and inventories of unsold homes have begun to tick up in recent months as starts have outpaced new-home sales. Still, the recent data cannot be taken as affirming these qualms. Rather, the August declines in starts, at this time, look merely to be random fluctuations within a continuing uptrend.

On net, housing construction—and construction spending in general—look to be rising nicely, offsetting most of the drag on economic growth from a faltering manufacturing sector. (Speaking of manufacturing, output there fell again in August, continuing its 2015 downtrend.) Rising construction opposite falling manufacturing spell continued GDP growth in the low 2% range, right in line with recent years’ trends.

Single-Family Homebuilding
Single-Family Homebuilding Chart
Chart Source: Census Bureau. As of 31 Aug 15

Michael Bazdarich

Product Specialist/Economist

Mike brings more than 45 years of experience to his position. "By the Numbers" will address economic data releases that are pertinent to a broad range of investors.

Prior to joining the Firm in 2005, Mike ran his own consulting firm, MB Economics. He earned his PhD in Economics at the University of Chicago.

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