May 16, 2008, 11:01 am
Economists React: ‘Let’s Not Kid Ourselves’ on Housing
Economists and others weigh in on the unexpected 8.2% increase in housing starts last month.
The headline increase in starts means nothing; it is all due to a rebound in the hugely volatile, but essentially trendless, multi-family sector, where starts plunged 35.1% in March and then jumped 36.0% in April. Almost every time multi-family starts drop sharply they rebound the next month; we don’t understand why the consensus view failed to take this into account. Much more important is the single-family sector, where starts dipped 1.7% to a new low of 0.692M. Single-family permits rose 4.0%, though, the first increase since March last year. One good month is not a recovery though, especially given Easter seasonal problems. Listen to the builders; NAHB [National Association of Home Builders] survey yesterday was hideous. –Ian Shepherdson, High Frequency Economics
Single family starts stood at 692,000 in April. Outside of a single month during the 1990-91 recession, this represents the low point since the 1981-82 housing market collapse… The inventory of unsold new single-family homes now stands at 470,00. A more normal level is around 350,000. Given current trends in new construction and sales, we estimate that it may take up to a year to achieve equilibrium — but, at least things are moving in the right direction. –David Greenlaw, Morgan Stanley
The rise in housing starts was entirely a pr