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U.S. Home Starts in June Rose Nicely, with a Special Push from the West

07/18/2012 by Alex Carrick, RCD Canadian Chief Economist

U.S. housing starts in June rose to their highest level since the recession, according to a joint press release issued by the Census Bureau and the Department of Housing and Urban Development.

At 760,000 units seasonally adjusted and annualized, home groundbreakings in the latest month were +6.9% versus May and +23.6% when compared with June of last year.

The most recent previous occasion on which the national level of starts was exceeded occurred in October 2008. At that time, starts were on a severe downward slide and the credit-crunch recession was becoming more entrenched.

Nearly four years have passed and now starts are beginning to rise from the dead again.

During the first six months of this year, U.S. home starts averaged 25.8% higher than in the front half of 2011.

The strong starts level in June was presaged by a permit level in May that reached nearly 800,000 units. The permit series leads starts by a month or two.

The permit number in June moderated slightly from its exceptional showing the month before. It fell to 755,000 units from 784,000.

That still left permits 19.3% higher on a year-over-year basis.

While both segments of the market have pulled ahead so far this year, multi-family starts (+41.6%) have been relatively more upbeat than singles (+19.8%). The percentage changes in brackets are average monthly starts during January through June 2012 over the same six months a year ago.

In the individual month of June, multi-unit starts rose 12.8% compared with a 4.7% increase for single-family homes.

In the statistical press release, the starts data is broken down into four major geographic regions. There was one clear standout in June – the West.

First-half home starts in the western U.S. were one-third (+33.8%) higher this year than last year.

Specifically in June, western starts were +36.9% month to month and +63.4% year over year.

The South has performed next best. Its year-to-date increase has been +29.5%. But June alone was -4.2% month to month, although +26.9% year over year.

The Northeast in June recorded a strong month-to-month gain (+22.2%), but a more modest year-over-year increase (+11.6%) and a relatively tame year-to-date rise (+14.0%).

The Midwest recorded a 12.5% monthly-average increase in the first half, but faltered in the latest period with a 7.3% decline versus May and a 19.8% drop compared with June of last year.

For starts to continue on their gradual upward path, the U.S. economy will need to exhibit continuing improvement, especially with respect to jobs and incomes.

June’s net jobs increase of only 80,000 won’t do the trick. The month-to-month employment increase should be at least 150,000 with accompanying significant drops in the jobless rate.

When the U.S. economy is breezing along with the top down and the wind in its hair, the unemployment rate can touch down at 5.0%. The current level is way too debilitating at 8.2%.

A sense of optimism about the future can be derived from some other statistical series on the economy. For example, U.S. industrial production in June exhibited a respectable increase (+0.4% month to month), according to the Federal Reserve.

June’s year-over-year uplift in the industrial production index was 4.7%.

Among major sub-groupings, manufacturing’s production index climbed 0.7% in June to stand 5.6% above the same month of last year.

The capacity utilization rate for total industry rose 0.2 percentage points in June, to reach 78.9%. As such, it was only 1.4 percentage points below its long-term (1972 to 2011) average (80.3%).

In manufacturing, the usage rate in June jogged 0.4 percentage points higher. Its current level of 77.7% falls just 1.1 percentage points below the 78.8% average experienced from 1972 to 2011.  

In Canada, the summer edition of the Bank of Canada’s Business Outlook Survey conveyed an ongoing improving-outlook sentiment.

In answer to most of the balance-of-opinion questions – i.e., the percentage of respondents in the affirmative minus those in the negative – the results were moderately-to-strongly positive.

The three key results were for next-12-months sales projections (a net +15% expect gains as opposed to losses), investment intentions (a net +24% plan to increase capital spending rather than make cuts) and hiring (an impressive net +53% will be taking on additional staff as opposed to shedding workers).

It appears time is doing its job of spreading a healing balm over our woozy economies. A full return to robust good health, however, will require a respite from further outbreaks of bad news. 

U.S. monthly housing starts
U.S. monthly housing starts
Jan-Jun average 2011 = 0.615 million units;
Jan-Jun average 2012 = 0.727 million units (+25.8%).
U.S. Annual Starts:
2007 = 1.355 million units (-24.8%);
2008 = 0.906 million units (-33.1%);
2009 = 0.555 million units (-38.8%);
2010 = 0.587 million units (+5.9%);
2011 = 0.609 million units (+3.8%).
Data source: U.S. Census Bureau (Department of Commerce).
Chart: Reed Construction Data - CanaData.
U.S. regional housing starts
U.S. northeast housing starts   
U.S. midwest housing starts     
U.S. northeast housing starts   U.S. midwest housing starts
U.S. northeast annual starts:
2010 = 71,600 units;
2011 = 67,700 units (-5.4%).
U.S. midwest annual starts:
2010 = 97,900 units;
2011 = 100,900 units (+3.1%).
Jan-Jun average 2011 = 65,300 units;
Jan-Jun average 2012 = 74,500 units (+14.0%).
Jan-Jun average 2011 = 97,200 units;
Jan-Jun average 2012 = 109,300 units (+12.5%).
U.S. south housing starts       
U.S. west housing starts        
U.S. south housing starts   U.S. west housing starts
U.S. south annual starts:
2010 = 297,500 units;
2011 = 307,800 units (+3.5%).
U.S. west annual starts:
2010 = 119,900 units;
2011 = 132,500 units (+10.5%).
Jan-Jun average 2011 = 297,700 units;
Jan-Jun average 2012 = 385,500 units (+29.5%).
  Jan-Jun average 2011 = 117,800 units;
Jan-Jun average 2012 = 157,700 units (+33.8%).
Data source: U.S. Census Bureau (Department of Commerce).
Chart: Reed Construction Data - CanaData.


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