Tag Archive for 'new housing starts'

Wells Fargo Reports: Housing Starts Hit an Air Pocket Somewhere in the South

Wells_Fargo_Securities_logoHousing starts plunged 9.3 percent in June, following a downward revision to the previous month’s data. June’s drop was primarily concentrated in the South where overall starts plummeted 29.6 percent.

Housing Starts Hit An Air Pocket Somewhere in the SouthHousing starts came in much weaker than our below-consensus forecast, and activity for May was revised down as well. While residential construction activity has clearly been disappointing, we believe the latest numbers overstate the extent of the weakness.

Housing starts rose in every region of the country except the critically important South, where they plunged 29.6 percent. The drop in the South seems odd given the region’s strong economic performance. Job and income growth have generally been robust in the South. Population growth has also increased, particularly in the region’s major markets such as Texas, Florida, Atlanta, Nashville and the Carolinas. The NAHB Homebuilders’ Survey did not detect any weakness in the South during the past few months, posting a 5-point rise in June and tacking on another 1-point rise in July. The decline in housing starts in the South is also out of proportion relative to permits, which have declined in recent months but were nearly 23.5 percent higher than starts in June. The large gap between permits and starts suggests that something is odd in the June housing starts data for the South, and that we should see a rebound in July.

Housing Starts Hit An Air Pocket Somewhere in the SouthExcluding the South, which typically accounts for half of new home construction, housing starts actually rose 14.6 percent in June. Starts increased 28.1 percent in the Midwest, 14.1 percent in the Northeast and 2.6 percent in the West. Single-family starts were mixed, however, falling 3.7 percent in the Northeast, while rising 10.5 percent in the Midwest and 3.2 percent in the West.

Even with June’s disappointing figures, overall housing starts and single-family housing starts through the first six months of 2014 are running slightly ahead of their year-ago pace. That is a sore consolation considering the disappointing housing activity in 2013. This year’s numbers, however, were held back by the harsh winter weather. The rebound from that period may have wreaked havoc with the seasonally-adjusted data. The greater problem for housing moving forward is lackluster demand for new single-family homes and shortages of lots, materials and labor in many of the strongest markets. The apartment market also appears close to topping out, with vacancy rates beginning to inch up and a multitude of projects on track to be completed in coming years. Permits for new multifamily projects fell 14.9 percent in June, following a 15.6-point plunge in May.

Housing Starts Hit An Air Pocket Somewhere in the SouthWhile it is hard to ignore June’s weak housing starts data, homebuilders do appear to be a bit more optimistic. The NAHB survey came in stronger than expected in July and builders reported both stronger current and future sales and increased buyer traffic. June’s drop in starts strikes us as odd and we expect a rebound in coming months.

Source: NAHB, U.S. Department of Commerce and Wells Fargo Securities, LLC

Wells Fargo Economics Group Reports: Housing starts, once again, came in below expectations, with overall starts falling 6.5 percent in May

Wells_Fargo_Securities_logoGimme Shelter

By Marek Vitner, Senior Economist and Anika Khan, Senior Economist

Housing starts, once again, came in below expectations, with overall starts falling 6.5 percent in May to a 1.001 million unit pace. Single-family starts fell 5.9 percent, while multifamily starts tumbled 7.6 percent

If I don’t get some shelter Oh yeah, I’m gonna fade away” Rolling Stones 1969 

While conditions are not quite as dire as they were when the Rolling Stones released “Gimme Shelter” back in 1969, hopes that this year would mark the break-out year for new home construction are rapidly fading away. The spring selling season is, once again, proving to be a bust, as new home sales and housing starts have failed to rally in the most important selling and building season of the year. Overall, starts fell 6.5 percent in May, as both single-family and multifamily starts declined during the month. Starts fell in every part of the country except the South, where they posted a fairly healthy 7.3 percent gain.

The Economy Needs a Lift from Housing

The increase in homebuilding in the South, where lots are more widely available, was one of the few bits of good news in this month’s report. Housing starts tumbled 25.2 percent in the Northeast, fell 16.5 percent in the Midwest and declined 16.3 percent in the West, where buildable lots are particularly scarce. While declines in multifamily starts account for much of the drop, single-family construction also fell in all three regions, with particularly large declines in the West, where they fell 22.2 percent and the Midwest, where single-family starts fell 9.6 percentThe economy certainly could use a lift from the housing sector. Housing starts have improved modestly over the past few years, but the recovery has been much slower than in previous business cycles. In fact, most of the improvement has come from the apartment sector, which provides less of a boost to employment and aggregate economic activity. As disappointing as the data have been, housing starts through the first five months of this year are running slightly ahead of their year-ago pace, with overall starts up 6.6 percent and single-family starts up 2.5 percent. That is not the increase we were hoping for, but is a little better than the general perception, particularly given the harsh weather at the start of the year.

Housing Needs a Lift from the Economy

While the NAHB/Wells Fargo Home Builders’ Market Index posted a solid 4-point gain in June, we do not expect conditions to materially improve that quickly. Housing permits fell 6.4 percent in May and, while all of May’s drop was in multifamily units, both single-family and multifamily permits are running slightly below the current level of starts. New home demand will need to get more of a boost from stronger economic growth. The number of quality jobs added so far in this recovery has been more supportive of apartment demand than single-family homes.

Source: U.S. Department of Commerce, NAHB and Wells Fargo Securities, LLC

Indicator Title Indicator Title Indicator Title

PCA: All 50 States Expected to Experience Housing Recovery in 2013

PCA Logop2013 Housing Starts Approach the One Million Mark

Since 2005, tepid economic growth and high foreclosure rates have depressed home prices, bloating inventories and preventing start activity. In 2013, economists are revising nearly a decade of pessimism and forecasting growth throughout the residential construction industry.

A new report from the Portland Cement Association (PCA) projects total housing starts to reach 954,000 units in 2013, reflecting further improvement on 2012’s nearly 30 percent growth.

“The possibility of one million starts in 2013 should not be dismissed,” PCA Chief Economist Ed Sullivan said. “Although the first half 2013 will be mired in a fiscal cliff hangover, we are decidedly optimistic about second half economic growth, job creation and consumer sentiment – all of which translate into a stronger home sales and starts activity.”

Even stronger growth in homebuilding is predicted to materialize in 2014 with starts surpassing 1.1 million.

In another optimistic turn from previous residential forecasts, PCA expects the recovery to be broad-based and is projecting all 50 states will see increases in single family housing this year. Already underway in the interior U.S., the emergence of accelerating construction growth has begun to appear in some the hardest hit states during the housing bubble burst. These regions are now likely to lead growth in coming years as the long depressed markets begin to return to housing construction rates consistent with their demographics.

“As the recovery unfolds, regions that once lagged recovery now begin to emerge as growth leaders. The Southwest and Southeast, for example, still have the weakest housing fundamentals on a relative basis to the Interior U.S, but on a construction activity basis, given the extremely depressed bases from which these regions are recovering from, they will likely be the housing growth leaders in coming years,” Sullivan said.

PCA expects multifamily construction to continue to grow at a strong pace as favorable fundamentals fuel the sector. Multifamily starts recorded a 55 percent gain in 2011 and 36 percent growth in 2012. PCA expects an additional growth of 15 percent in 2013 to 277,000 units. Damaged credit due to foreclosure activity and tight mortgage lending standards have combined to create robust apartment demand.

About PCA
The Portland Cement Association represents cement companies in the United States and Canada. It conducts market development, engineering, research, education, and public affairs programs. More information on PCA programs is available at www.cement.org.

Wells Fargo Securities Reports: Housing Starts Jump In September

Housing starts rose to a 658K-unit pace in September on the heels of an upwardly revised 572K-unit pace in the month of August. The gain was driven primarily by a 51.3 percent increase in multifamily starts.

Multifamily Starts Lead the Way

New housing starts jumped 15.0 percent in the month of September, after declining 7.0 percent in August. The volatile multifamily component rose an impressive 51.3 percent. The pace of multifamily home construction rose to 233K units, the fastest pace of building activity since October 2008. The sharp increase in multifamily construction continues to underscore the pickup in demand in the apartment market. The displaced individuals from the foreclosure process combined with the desire for individuals to maintain mobility in a tough job market have helped to support strong demand in the apartment segment. Single-family home construction also edged upward, rising 1.7 percent to a 425K-unit pace. The improvement comes after single-family construction declines over the past two months.

Regional Trends Highlight Differing Pace of Recovery

On a regional basis, the housing starts data highlight the differing pace of the housing market recovery across the country. Single-family construction activity remains depressed around the country. However, several regions did post sizable gains in multifamily construction activity. The largest jump in building activity occurred in the West, where total activity increased 18.1 percent in September, with the pickup driven by multifamily construction. Building activity in the West continues to improve faster than in other parts across the country, rising 22.6 percent over the past year, as the region comes off of very depressed levels. New construction in the South also posted a 15.7 percent increase, driven entirely by a 69K increase in multifamily starts. While there is a long road ahead for the home construction industry, there are some encouraging signs that regional stability is occurring.

Housing Permits Signal Some Pullback Ahead

The pace of building activity observed in September is likely not sustainable given the current economic environment. Housing permits, a leading indictor of future building activity, fell 5.0 percent for the month, with most of the pullback in permits occurring in the volatile multifamily component, which declined 14.5 percent. Single-family permits also fell slightly on the month, declining 0.2 percent. The ongoing waves of foreclosures combined with continually falling home prices remain the largest obstacle for sustainable improvement in single-family home building.

Slow Improvement Ahead

We continue to expect new home construction to gradually improve over the next several months. Given consumer preferences for the rental market, the improvement for the remainder of this year will likely continue to be reflected in multifamily building. Our forecast for next year is for an average of 610K new housing starts, improving to 740K in 2013.