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Real Time Insight

Just one day away from the Fed meeting, and we got the last batch of important data for the FOMC to consider.  It was housing construction numbers for May.

This macro release raises a number of important questions to debate. 

Here is the data that was released…


The most forward-looking indicator that came out today:  building permits.

Privately owned housing units authorized by building permits in May came in at 974,000 (SAAR). This is -3.1% below the revised April rate of 1,005,000, but is +20.8 percent above the May 2012 estimate of 806,000.

In annual terms, we should be able to get to 1.2 million permits issued by this time next year.  1.5 million permits would be a good historical average.  In other words, we have gotten two-thirds of the way back.  At this rate, the housing market healing process is at least two years away from completing itself.  No surprise, that is the estimated time for when the unemployment rate is likely to get below 6.5%.

Inside the full housing permits number was the single-family house number and the multi-family apartment number. 

  • Single-family authorizations in May came in at a rate of 622,000; this is +1.3 percent above the revised April figure of 614,000. A year ago, it was 499,000.  This is a +25% rise in y/y terms.
  • Authorizations of units in buildings with five units or more were at a rate of 325,000 in May.  A year ago, it was 285,000.  This is a +14% rise in y/y terms.


Privately owned housing starts in May were at 914,000 (SAAR). This is +6.8% above the revised April estimate of 856,000.  The May number is +28.6% above the May 2012 rate of 711,000.

  • Single-family housing starts in May were at a rate of 599,000.  This is +0.3% above the revised April figure of 597,000.  This was 515,000 last May, up +16% in y/y terms. 
  • The May rate for units in buildings with five units or more was 306,000.  A year ago, the number was 181,000.  This is still the hot area, up +69% in y/y terms.

Looking at both the permits growth over the last year, and starts growth over the last year, is the most interesting trend to track. 

I said this earlier, but it bears repeating.  Permits are more forward-looking than starts.  In y/y terms, single-family permits are growing +25%, while single-family starts are up +16%.  This tells me there is stronger momentum building in the single-family market now.  This is good news for builders, home retail, and home improvement industries.

In y/y/ terms, the multi-family apartment rise in permits was +14%, while multi-family starts are up +69%.  While still a strong annual double digit rise here, the baton may be passed to the single-family segment in this data.

That is an important takeaway.

What Do You Think?

(1) Is the single-family housing markets going to lead us from here?

(2) Are we two years away from a full recovery in housing?

(3) Does this change any thinking at the Fed?







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