January 29, 2013
U.S. December home starts provide a big grin
U.S. December housing starts surprised just about everybody. And I mean in a pleasant way. (Unfortunately, we’ve become too accustomed to rude shocks.) They’re not just getting by, they’re thriving.
At 954,000 units seasonally adjusted and annualized (SAAR), the latest new home starts were +12.1% month-to-month and +36.9% year-over-year.
Only four months ago, they were a much weaker 750,000 units. Twelve months ago, they were 697,000 units. In April, 2009, at their lowest point in the recession, they were 478,000 units.
Even if starts settle down around 900,000 units for 2013 as a whole, they will be 15% higher than in 2012. If they stay around 950,000 units, they will be +22%.
Residential building permits provide insight into the short-term outlook for starts. The December level of permits was 903,000 units SAAR, which was about even with November’s revised 900,000 units, but up nearly 30% versus December 2011’s 701,000 units.
The latest new home statistics appear in a joint press release from the Census Bureau and the Department of Housing and Urban Development.
The multi-family market was especially strong in December, +20.3% month-to-month and +91% year-over-year. For 2012 as a whole, multiples were +38.2% compared with 2011.
The multiples market features mainly condominiums, many of which are being sold to investors who, in turn, are renting them out to new labour force entrants (i.e., young adults) or victims of mortgage foreclosures.
The actual number of multiple-unit starts in December at 333,000 SAAR was the highest since June 2008’s 399,000 units.
The singles family market also improved, but not as much. Their December month-to-month change was +8.1%. Year-over-year, they were +18.5%. Their 2012 monthly average was almost one-quarter higher (+23.2%) than 2011’s monthly average.
The press release also sets out the numbers for four geographic regions. For the year as a whole, the West was the leader, +31.9%, followed by the South, +29.5%, and Midwest, +25.2%. The Northeast recorded the smallest increase, +13.8%, which wasn’t so bad either.
For the individual month of December, new home starts in the Northeast were +21.4% month-to-month and +37.1% year-over-year. In the Midwest, they were +24.7% month-to-month and +10.7% year-over-year.
The December month-to-month change in the South was +3.8%, while the year-over-year difference was +43.0%. The comparable figures in the West were +18.7% and +57.4%.
There are some large gains in the foregoing listing of regional percentage changes.
(At the same time, it should also be noted that the level of foreclosures in some states remains high. Florida is often cited as the worst case.)
The improving U.S. homebuilding sector will pump up manufacturing activity in two ways — initially, through sales of building materials, then later through the myriad of items that go into a home.
The second effect will be most pronounced among first-time homebuyers or renters who are starting from scratch.
Stronger housing starts also provide a lift to retail sales. There is an unending list of things — furniture, appliances, paintings, bedding, silverware, etc. — individuals and families either acquire or have on a wish list for their “cocoons”.
In a separate report from the Census Bureau and the Department of Housing and Urban Development, the number-of-months inventory of unsold new homes in the U.S. has fallen to only 4.7 months. That’s comparable to the level before the recession.
The figure had been as high as 12 months (i.e., a year) in January 2009.
For Canada, a primary benefit of the stronger U.S. new homes market will be greater forest product export sales. Softwood lumber prices are already on the move upward, after a long hiatus.
While the U.S. housing market is surging, Canada’s residential real estate has moved onto shaky ground. Existing home sales have weakened and prices in several major urban markets are softening.
At the same time, however, Statistics Canada’s new housing price index (NHPI) has maintained its upward momentum. For November 2012, the NHPI was +0.1% month-to-month and +2.2% year-over-year.
The leaders among the cities in year-over-year percentage change were Toronto and Winnipeg, both +4.1%.
The only centre with a significant new home price decline was Victoria, -2.9%.
(seasonally adjusted at annual rates)
Data source: U.S. Census Bureau (Department of Commerce). Chart: Reed Construction Data - CanaData.