Wednesday, October 17, 2012

Better-than-expected Building Permits & Housing Starts

Housing data keeps improving, but then again, it is all in the eye of the beholder.  Both building permits and starts in September blew away the Street's estimates.
Permits came in at an annualized rate of 894K, up from the downwardly revised 801K in August, and significantly above the 810K consensus.
  • From the previous month, total permits went up 11.6%, driven mostly by MDUs of 5+, which went up nearly 23%.  Permits for single-family homes inched up 6.7% m/m.  Regionally, the Midwest led the way with a 19.5% increase.
  • Permits increased 45.1% from last year; again, driven by the 5+ MDUs, which nearly doubled.  Single-family homes permits were up 27.3%.  In terms of Y/Y change, the West was the leader with a 56.8% increase from Sept. '11. 
Housing starts came in at an annualized rate of 872K, up from August's upwardly revised 758K, and above the 765K consensus. 
  • From August, housing starts were up 15.0%, driven by a 25% increase in 5+ MDUs.  Regionally, the West led the way with a 20.1% m/m increase, while the Northeast experienced a 5.1% decline.
  • On a Y/Y basis, housing starts were up nearly 35%.  Surprisingly, this was driven by the 42.9% increase in single-family home starts.  All regions experienced growth from the prior year, with the Midwest leading the way with a 47.4% increase.
While these numbers are much better than expected, we continue to believe that if these starts are completed, they will boost inventory too much which then will put pressure on overall prices.  In addition, such great numbers do not necessarily mean that the builders are seeing so much of an increase in demand.  They could just be taking advantage of continuing lower construction costs.  We note that the latest MBA data does indicate an increase in purchase applications, but at a declining rate. 

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