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June 16, 2017 By Peter Boockvar

Housing starts, permits disappoint


United States

Both housing starts and permits disappointed in May. Starts totaled 1.092mm annualized, well below the estimate of 1.22mm and April was revised down by 16k to 1.156mm. This is the slowest pace since September. Both components contributed to the miss. Single family starts fell by 32k m/o/m to 794k, the lowest since September. Multi family starts totaled 298k, down 32k m/o/m and that is the slowest pace of starts also since September. The miss on the permit side was 81k while April was basically left unrevised. Single family permits fell by 15k and multi family permits were lower by 45k.

Bottom line, we can’t blame weather and we can’t blame fixed mortgage rates for the data miss (maybe people searching for ARM’s are discouraged? Don’t know). In an industry that needs more inventory on the single family side, particularly for lower priced homes, we saw an 8 month low in starts and permits. As seen in the chart, the recovery has been very stair step so maybe this is just a temporary pause before the next steps up. We’ll see but the industry is still under building as defined as running at a pace well below historical trends. At 794k, single family starts are still 20% below the 25 year average. It also compares with the bubble peak of 1.82mm in January 2006. In this week’s NAHB builder report, again the shortage of labor and lots were to blame as two key factors impacting the business so we can chalk up those two factors also for the current level of activity. Also, the millennial desire to own is there but the finances unfortunately are not for many who can’t afford a down payment. For multi family, the starts data is much more volatile m/o/m and the supply recently has been much more robust. A pause then wouldn’t be too much of a surprise. Rent growth should soften from here because of large backlog supply but I think the demand side for renting will be healthy for a while. As for the economy as a whole, this type of data point just adds again to the mediocre growth rate we are still stuck in.

SINGLE FAMILY STARTS

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Filed Under: Latest Data

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About Peter

Peter is the Chief Investment Officer at Bleakley Advisory Group and is a CNBC contributor. Each day The Boock Report provides summaries and commentary on the macro data and news that matter, with analysis of what it all means and how it fits together.

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Disclaimer - Peter Boockvar is an independent economist and market strategist. The Boock Report is independently produced by Peter Boockvar. Peter Boockvar is also the Chief Investment Officer of Bleakley Financial Group, LLC a Registered Investment Adviser. The Boock Report and Bleakley Financial Group, LLC are separate entities. Content contained in The Boock Report newsletters should not be construed as investment advice offered by Bleakley Financial Group, LLC or Peter Boockvar. This market commentary is for informational purposes only and is not meant to constitute a recommendation of any particular investment, security, portfolio of securities, transaction or investment strategy. The views expressed in this commentary should not be taken as advice to buy, sell or hold any security. To the extent any of the content published as part of this commentary may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. No chart, graph, or other figure provided should be used to determine which securities to buy or sell. Consult your advisor about what is best for you.

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