Friday, July 17, 2009
The Census Bureau reported(.pfd) a jump in housing starts and permits for new construction in June, however, the increase leaves new home construction at levels that are still far, far below that seen during any previous housing downturn in data going back 50 years.
Starts rose 3.6 percent in June to a seasonally adjusted, annualized rate of 582,000 units following a jump of 17.3 percent in May. The June increase was paced by single-family homes, up 14.4 percent for the month. Housing starts are now down 46 percent on a year-over-year basis, 75 percent below the peak in September of 2005.
Permits for new construction, a leading indicator for the homebuilding industry, were up 8.7 percent last month to a rate of 563,000 units after a 4.0 percent increase the month before. From year-ago levels, permits are now down 52 percent, a full 74 percent off the fastest rate of permit issuance back in January of 2006.
While the recent improvement in new home construction is certainly good news for the ailing home building industry, it's important to put the data into its proper context.
As noted here earlier in the year, it is difficult to appreciate just how depressed current levels of home building are without looking closely at historical comparisons. While the current level of housing starts are up 13 percent from the April lows and permit issuance has increased 22 percent since that time, the April readings were the lowest levels since 1959 and by a very wide margin.
Prior to 2008, the record low for housing starts had been an annualized rate of 798,000 in January of 1991, putting April's new all-time low 43 percent below that mark. Starts in June are still are still 29 percent below the 1991 level and, in population adjusted terms, more than 40 percent worse.
It's going to be hard to get too excited about the new home construction data until we at least get a little bit closer to the pre-2008 all-time lows.