One Big Anomaly in the U.S. June Housing Start Figure
Alex Carrick
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Seed Newsvine |
U.S. June Housing Starts at 1.066 Million Units
As reported by the Census Bureau and the Department of Housing and Urban Development, U.S. housing starts were 1.066 million units in June 2008, up 9.1% from the previous month, but down 26.9% from June of last year. On a year-to-date basis, U.S. housing starts have averaged 1.034 million units through the first half of this year, which is a decline of 29.0% from the first half of 2007.
But Rule Changes in New York Caused a Big Anomaly
However, there is a “big anomaly” in the latest numbers. Due to the fact that new building code rules took effect in New York City on July 1, there was a rush to get approvals and starts underway before the changes took effect. As a result, the starts figures for the Northeast region are artificially inflated, as are the figures on multi-family starts nationwide.
Starts in the Northeast region doubled in the latest month versus May, due to the advancement of projects. And multi-unit starts nationwide rose to their highest level since January 2006, for the same reason. Just the same, it should be noted that multi-unit starts so far this year − that is, before this unique event − have been performing much better than single-family starts. In fact, their average level through every month of this year has been above last year’s comparable figure.
Regional Year-to-date Declines Range from -10.6% to -36.0%
The Northeast’s year-to-date decline has been only -10.6%. The year-to-date declines in the other three major geographic regions, based on average starts through June, have ranged from -28.9% for the South to -36.0% for the West, with the Midwest in the middle at -30.8%. For June alone, the South (+0.4%) was the only one of the three regions with a month-to-month increase, no matter how small. Also for June alone, but on a year-over-year basis, the Midwest (-45.3%) turned in the most stunning decline.
Same Crossover Problems but also Special Circumstances
While there are the same crossover problems in all of the regions – i.e., reactions to the speculative binge in the earlier boom times and mortgage foreclosures as a result of the subprime mortgage mess − each region is also facing its own set of special circumstances.
The Midwest is caught in the downsizing of SUV and truck production as a result of the high cost of gasoline. There was also flooding in the plains states earlier this year that diverted attention away from other economic issues.
In the South, housing market difficulties in Florida are being partially offset by relatively healthy markets in the major cities of Texas. Some Gulf Coast and adjacent states are participating in the energy-related (i.e., drilling and refining) economic boom that has arisen from record-high world oil prices. The West region is a mix of economic problems mainly tying into high fuel costs – both in terms of tourism in Las Vegas and the airline industry in the Pacific northwest.
July Starts will Take a Hit
Returning to the Northeast housing market for a moment, the good news is that home-builders obviously do intend to go ahead with significant multi-unit construction in the months ahead, or they would not have sought the early approvals. However, actual site work may not proceed as quickly as normal. Furthermore, starts in the next reporting month, July, are likely to take quite a hit.
