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Thursday, June 16, 2011

Housing Starts

First up on the market-movement agenda for today is Housing Starts, a monthly examination of how many new residential buildings have started construction.  The figures are given as an annualized rate, meaning we are looking at how many houses would be built in the space of one year if the current rate of construction were carried forward.
No, I don't know why it's calculated this way, rather than by just looking at the number of residential units (raw or seasonally adjusted) actually began construction during the month.  I'll put that on the list of things to go find out and share with you all.  One of these days.
Anyway, last month we had an annualized level of 523,000 (based on April figures).  In a statement that should surprise nobody, the Econoday-surveyed analysts are feeling optimistic, and are expecting the annualized construction level to rise to 547,000 for May.
Oops.  Before I forget, let's answer the burning question, shall we?  Why should we care?
We should care, because it's all about the trickle-down impact.  Ignore, for the moment, the fact that improving housing starts implies confidence in the construction industry, because builders rarely build unless they are confident it will sell - that's handy, but it's not why the Street cares.  Rising home construction brings with it rising construction employment;  at the end of the day, you need bodies hauling brick and lumber, driving nails, plumbing and wiring and painting and landscaping and so on and so forth, to build a house.  Then you need to outfit the house, and that's durable goods purchases:  stoves, refrigerators, washers, dryers, air conditioning units, furnaces, heat pumps, light fixtures, carpet, and a bunch of other things that I probably take for granted until they break.  Then, when the house sells, mortgages.
So the Street wants to see these numbers go up.  They really want to see these numbers go up.
To see if the Street gets what it wants, we turn to the joint US Census Bureau and Department of Housing and Urban Development New Residential Construction in May 2011 report.  This report tells us that the analysts were wrong, but in a good way.  May actually comes in with a seasonally adjusted annual rate of 560,000, blowing the expectations out of the water.  419,000 of those were for single-family housing.
In other interesting news, May saw a seasonally-adjusted annualized 612,000 building permits issued, substantially improved from April's 563,000 and implying that housing starts should continue to rise.  Also, a seasonally-adjusted annualized 544,000 residential buildings were completed in May.
So, that's some good news for the markets.  If the jobless claims follow suit, and if Greece doesn't collapse into a frenzy of debt-driven self-slaughter, and if we can get some good news about the debt ceiling, maybe the markets will do well today.

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