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Macro View

This morn, the U.S. Census Bureau and HUD jointly announced the following new residential construction statistics for December 2012.

The takeways? We are doing a +30% annual increase, in the rear view mirror, for both permits and starts.  Pretty impressive stuff! Permits weren’t too strong in December.  Nonetheless, permits reached their highest level since July 2008.  Starts were very strong.  A 954,000 number in starts rounds to a million now.  This was the highest rate in four years.  Two-thirds of those were single family.  One third was “5 units or more”, which are apartments.  By far, the apartment growth rate is the more impressive of the two. Is there more runway here? 1.5 million in starts is what we need to meet U.S. population growth.  However, the question for investors is this “Have the homebuilders run up too far and too fast?”  The ishares Dow Jones Construction Index (ticker: ITB) is up 68% over the last year. Here is the data -- BUILDING PERMITS Privately-owned housing units authorized by building permits in December were at a seasonally adjusted annual rate of 903,000. This is 0.3% (±1.0%)* above the revised November rate of 900,000 and is 28.8% (±1.4%) above the December 2011 estimate of 701,000. Single-family authorizations in December were at a rate of 578,000; this is 1.8% (±1.0%) above the revised November figure of 568,000. Authorizations of units in buildings with five units or more were at a rate of 301,000 in December.  An estimated 813,400 housing units were authorized by building permits in 2012. This is 30.3% (±1.1%) above the 2011 figure of 624,100. HOUSING STARTS Privately-owned housing starts in December were at a seasonally adjusted annual rate of 954,000. This is 12.1% (±13.4%)* above the revised November estimate of 851,000 and is 36.9% (±22.0%) above the December 2011 rate of 697,000. Single-family housing starts in December were at a rate of 616,000; this is 8.1% (±9.7%)* above the revised November figure of 570,000. The December rate for units in buildings with five units or more was 330,000.  An estimated 780,000 housing units were started in 2012. This is 28.1%(±2.6%) above the 2011 figure of 608,800. My question for you today…. If permits and starts are up +30% and broad share indexes are up +68%, is it time for a pull-back in homebuilder indexes?


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