Don't get too excited about the housing starts

There's probably going to be a lot of "clunking around at the bottom" in the home construction statistics, perhaps going on for years, and the June report on housing starts from the Census Bureau is a good example of how optimists (are there still housing optimists out there?) are being set up for many months of repeated disappointment.

It's one thing to reach a bottom, which may now be forming in both the construction and sales statistics (certainly not in the price statistics), but it's an entirely different thing to make a substantive move up from the bottom.

Due to an upcoming change to New York building codes that saw homebuilders rushing to file permits and start construction on multi-family homes, the 9.1 percent overall increase in housing starts shown below was not such a substantive move.
Housing starts rose to an annualized rate of 1.066 million, the second best total so far this year, and permits for new construction soared 12 percent to 1.099 million units, the best month so far in 2008. However, the entire gain can be attributed to the 103 percent increase in housing starts and the 73 percent gain in housing permits for multi-family home construction in the New York area.

Excluding this activity in the Northeast, overall housing starts fell 4 percent.

Single-family construction statistics were unaffected by the building code changes and single-unit housing starts fell 5.3 percent to a 647,000 pace, the lowest level since January 1991.

A better indication of the current condition in residential construction came in yesterday's National Association of Home Builders' Housing Market Index which fell to 16, the lowest level since record-keeping began 23 years ago.