30a REAL ESTATE TREND
Trend in housing starts/permits picking up
Housing starts -1.1%m/m to 698k in Feb. Permits +5.1% to 717k. Housing activity was a bit stronger than we expected in February. While overall
starts edged down 1.1%m/m to 698k (cons 700k, UBSe 680k) in February, the prior month was revised up to 706k (from 699k). Permits jumped
5.1%m/m to 717k (cons: 686k, UBS: 680k) from 682k.
Within starts, the multi-family sector jumped 21.1%m/m in February after a 12.1% gain the prior month. Single-family starts, declined 9.9%m/m to 457k
from 507k. The decline reflected a 50k drop in the South.
More importantly, single-family permits, which are included in the Conference Board’s index of leading economic indicators, increased 4.9%m/m to
472k annualized units—the highest level since April 2010. While yesterday’s homebuilder survey showed no change in the housing market index (HMI)
in early March, at 28, the index was at its highest level since May 2007. The net pickup is consistent with a rise in the trend in housing starts (see
chart).
Seasonally adjusting for weather is always a challenge in the winter months, making monthly data volatile. So far in the first quarter, both starts and
permits are above their earlier pace: starts have averaged 0.702 million units and permits have averaged 0.700 million. For comparison, in Q4, starts
averaged 0.670 million (and 0.610 million in all of 2011) and permits 0.665 million (and 0.606 million in all of 2011). If anything, the nearly identical rise
in permits compared with starts in the first quarter from the fourth quarter is encouraging, as the data suggest more than just weather-related strength
since permits tend to be less weather sensitive than starts. We still expect housing starts to rise from 610k in 2011 to 800k in 2012—70k units above
the early-March Blue Chip consensus. We expect single-family starts to rise to 525k in 2012 and multifamily to rise to 275k. Jobs are the key signpost.
If upcoming monthly average nonfarm payroll jobs continue rising at over 200k per month, we will review our 800k housing starts forecast.