Recent reports regarding homebuilder sentiment and housing starts have been confusing of late, in part due to the influence of statistics merging between the single-family and multifamily home sectors. Total starts dropped by 5.8% in the latest report, driven largely by falls in multifamily building; however, it is known that multifamily statistics swing wildly due to the influx and interruption of large building projects. Moreover, despite the drop, the numbers were still better than March 2011, since it was the worst year for real estate construction in U.S. history. For more on this continue reading the following article from TheStreet.
The numbers are in, the analysts are out, and given the volatility of this particular economic indicator, the spin is at full speed:
"Good News on Housing Permits More Than Offsets the Bad News on Starts"– HIS Global Insight
"Housing Starts Decline Again" – Capital Economics
"March Multifamily Starts Down; Permits Continue Upward Trend"– KBW
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"March Construction Numbers Aren’t As Bad as They Look"– Trulia.com
"Housing Starts Lacking Consumer Confidence" — Sageworks Inc.
Here’s the problem: We are living a tale of two housing markets, single and multi-family. Depending on what kind of builder or investor you are, you’re going to see the housing starts numbers differently. Let’s weed through it first:
Total starts fell 5.8%, driven by a nearly 20% drop in multi-family. Single family was essentially flat month-to-month. But remember, multi-family is a very volatile number and can swing 20-30% monthly due to large local projects. Yes, they are both ahead from last year, but 2011 was the worst year in the history of U.S. home building.
"The further fall in housing starts in March means that about a third of the past year’s improvement in homebuilding has now been undone. But the continued rise in building permits is an encouraging sign which suggests that housing starts will improve again later this year," writes Paul Diggle at Capital Economics.
Building permits are always seen as a better indicator of construction, or at least more dependable and less influenced by weather. Single family permits dropped 3.5% month to month, but multi-family surged ahead 24% to the highest level in four years.
"The pickup in multifamily construction is taking place most noticeably in the South and West–again, not a big surprise–since 46 of the 50 fastest-growing metro-area populations from 2010 to 2011 were in the South or West, according to the Census Bureau," writes IHS Global Insight’s Patrick Newport.
Clearly we’re still seeing big demand in the multi-family sector, but single family is still faltering.
This article was republished with permission from TheStreet.