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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.

June Housing Starts up a Little

Total housing starts rose 4.8% in June, with the more important single-family starts measure up 4.4%. These sound like pretty good numbers, so why are we giving only faint praise to these data in the headline above? A look at the accompanying chart tells you why. Even with the June gains, the June level of single-family starts (blue line) is still lower than what we saw last November.

We made this remark a month ago, and it is still true. But for that outsized jump in starts in February, housing stats would clearly be on a flat trend, after having risen nicely in 2015. Yes, our forecast has been for starts to level off this year, and yes, thanks to that February spike, the homebuilding data have not been fully consistent with that projection. But neither do they contradict it. As Janet Yellen said only a month ago, 1 month does not make a trend, not even a 1-month spike as sharp as what we saw for starts this past February.

Other homebuilding indicators were also mixed, but even less positive than single-family starts. Thus, single-family permits continued essentially flat (green line in chart), at levels no higher than what we saw last December. Multi-family starts were up 5.4% in June (not shown), but that gain, along with those of April and May, was only a fraction of the declines seen in the first 3 months of the year, leaving multi-family activity on a clear downtrend.

Finally, within regions, single-family starts in the crucial South continued essentially flat for the seventh month in a row. (The South accounts for more than half of all single-family homebuilding in the US.) As it happens, the June starts gain was due largely to a spike in the Northeast. This region accounts for less than 10% of single-family homebuilding nationwide and starts there are especially volatile month to month.

To repeat, homebuilding activity may be flattening out, or it may be continuing a grudging uptrend. It certainly is not plunging, but neither is it growing fast enough to drive robust GDP growth.

Sales and Starts of New, Single-Family Homes
Sales and Starts of New, Single-Family Homes
Source: Census Bureau. As of 30 Jun 16.

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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