June Starts Low and Flat at 582,000 Units Annualized

U.S. housing starts in June were a continuation of what they have been throughout this year – low and flat. However, a slight upward pattern is starting to emerge in the chart showing the annualized rate of monthly starts (see below). What are the latest trends?

It is a given that U.S. housing starts will be down by a staggering amount this year versus last year. However, in terms of assessing the outlook, it is important to look at more recent comparisons. Month to month can be quite volatile. Therefore, since the latest numbers are for June, let’s examine the results for second-quarter 2009 versus the first.

Quarter-to-quarter Regional and Type of Structure Comparisons

National housing starts in the second quarter just ended were +2.5% versus the first quarter of this year. Regionally, on the same quarter-to-quarter basis, there were increases in the Northeast (+14.8%), West (+13.9%) and Midwest (+9.6%). The only decline came in the South (-6.6%). However, the size of the market in the South is still way bigger than in any of the other regions (i.e., more than double the next biggest market, the West).

Single-family starts were +18.0% in second-quarter 2009 versus the first-quarter. Multi-family starts, however, were -30.3%. Multiple-unit construction is traditionally more volatile. Also, it is a lot smaller percentage of total starts than the single-family category.

Reports by various housing agencies indicate that home prices are down, affordability is up, mortgage rates are low and foreclosed homes as a percentage of total sales are on the decline. The market for new housing is gradually picking up, with a number of hurdles to be crossed along the way. These include a jobs market that is still in decline, credit tightness that is limiting access to funds and an excess of unsold home inventories.

Unsold Homes Inventory Report

Watch for the New Residential Sales Report from the Census Bureau and Department of Housing and Urban Development, scheduled for release on July 27. Included in this report is an estimate of the number-of-months inventory of unsold homes, which in May stood at 10.2, down from a high of 12.4 in January 2009. If this figure falls significantly in June, that will be a further important green light for the industry going forward.

Jan-Jun average 2008 = 1.038 million units; Jan-Jun average 2009 = 0.534 million units (-48.5%)

United States' Annual Starts: 2005 = 2.068 million units (+5.7%); 2006 = 1.801 million units (-12.9%); 2007 = 1.355 million units (-24.8%); 2008 = 0.906 million units (-33.1%).

Northeast

Jan-Jun average 2008 = 140,000 units; Jan-Jun average 2009 = 60,500 units (-56.8%).

U.S. Northeast annual starts: 2007 = 142,900 units; 2008 = 121,000 units (-15.3%).

Midwest

Jan-Jun average 2008 = 147,500 units; Jan-Jun average 2009 = 87,000 units (-41.0%).

U.S. Midwest annual starts: 2007 = 210,100 units; 2008 = 134,900 units (-35.8%).

South

Jan-Jun average 2008 = 519,800 units; Jan-Jun average 2009 = 268,800 units (-48.3%).

U.S. South annual starts: 2007 = 681,100 units; 2008 = 453,400 units (-33.4%).

West