The Census Bureau and the U.S. Department of Housing and Urban Development said that housing permits rose to 812,000 in July, its highest level since August 2008. This represents a 6.8 percent gain, up from 760,000 in June. To keep the ascent in perspective, housing permits were 684,000 in January. July’s gains reflect increases in both single-family and multi-family permitting, with larger growth in the latter. Higher permitting levels could indicate increased residential construction down the line, and I have predicted for some time that we would reach 800,000 housing starts by year’s end.
With that said, housing starts dropped slightly for the month from 754,000 to 746,000. The decline was attributable to fewer single-family units being started, down from 537,000 to 502,000. The number of multi-family unit starts, though, rose from 217,000 to 244,000. Even with overall housing starts lower in July, the longer-term trend remains a positive one. There were 614,000 housing starts on July 2011, representing a 21.5 percent year-over-year gain.
Housing completions were also higher, up from 624,000 to 668,000 for the month. Completions were up 5.4 percent year-over-year.
While the latest housing starts provide mixed news, the larger storyline is positive. Gradual improvements in housing have helped lift confidence in this still-depressed marketplace. This is good news for both manufacturers and the larger macroeconomy. After all, housing still represents a major headwind for the economy, with excess inventory, upside-down mortgages and financial concerns still persistent issues. Nonetheless, it is nice to see slow-but-steady progress in housing starts and overall real estate activity.
This sentiment is reflected in the latest survey from the National Association of Home Builders (NAHB) and Wells Fargo. Their Housing Market Index, which was released yesterday, rose from 35 in July to 37 in August. This is the highest point since February 2007. This is a tremendous turnaround in home builder confidence since September 2011, when the index stood at 14. Still, there is a long way to go to improve this market beyond its sub-par levels.
Gains in August were primarily in the Midwest and South, with declines in the West and Northeast. The outlook for future activity remains optimistic. The index for single-family sales over the next six months increased from 43 to 44 for the month. It had been 29 in January.
Chad Moutray is chief economist, National Association of Manufacturers.
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