The Census Bureau and the U.S. Department of Housing and Urban Development said that new residential construction declined significantly. New housing starts were down from an annualized 1,036,000 units in March to 853,000 units in April. These numbers illustrate the choppiness of the housing market from month-to-month that occurs even with seasonally-adjusted data. While the longer-term trend line remains positive (up 13.1 percent year-over-year), it is hard not to say that the construction figures were not disappointing.

The largest factor behind the decline in housing starts was the plummeting of multi-family housing starts, down from 398,000 in March to 243,000 in April. These declines appear to have taken place in all regions of the country except for the Midwest. Multi-family starts nationally are now slightly lower than they were 12 months ago, reversing the healthy gains seen in recent months. Meanwhile, new single-family construction starts decreased less dramatically, down from 623,000 to 610,000. These losses were primarily in the South. The year-over-year pace for single-family starts is still quite impressive, up 20.8 percent.

At the same time, housing permits soared to 1,017,000 annualized units in April from 890,000 in March. The permits data are important because they serve as a proxy for future construction activity, and as such, they allow us to get less worried about the declines in starts. The good news is that this is the first time that housing permits have been above 1 million since June 2008 (when they were headed lower). The year-over-year growth in housing permits between April 2012 and April 2013 was a very healthy 35.8 percent. (continue reading…)

The National Association of Home Builders (NAHB) and Wells Fargo reported that the Housing Market Index (HMI) edged higher, up from a revised 45 in November to 47 in December. A reading of 50 would indicate that there were an equal number of builders who were positive and negative in their outlook, so this indicates – much as it did last month – that housing contractors that have almost become net positive in their attitudes. This is a tremendous improvement from even a few months ago, as it was almost half this level (24) just eight months ago in April.

Looking at specific regions, there was continued progress in December in the Northeast and Midwest, with a slight downtick in the South and West. All regions have seen steady progress, though, over the past few months. Nationally, single-family sales volume increased from 49 to 51 in the month (up from 41 in October). The traffic of potential buyers was also higher.

NAHB Chief Economist David Crowe said, “While there is still much room for improvement, the consistent upward trend in builder confidence over the past year is indicative of the gradual recovery that has been taking place in housing markets nationwide and that we expect to continue in 2013.” At the same time, tougher lending standards and still-weak financial conditions continue to hold back faster growth.

Tomorrow, the Census Bureau releases new housing starts and permits data. Last month, housing starts rose to 894,000, and they have risen almost 42 percent year-over-year. While the consensus estimate for new residential construction is for 875,000 units, overall housing data continue to reflect a longer-term upward trend.

Chad Moutray is chief economist, National Association of Manufacturers.

The National Association of Home Builders (NAHB) and Wells Fargo reported that the Housing Market Index (HMI) rose from 41 in October to 46 in November. This is the seventh consecutive monthly increase in the HMI, having risen from 24 in April. One year ago, the index stood at 19. As such, there has been a tremendous increase in confidence in 2012, with higher sales and starts helping to propel economic growth in the sector. Builder confidence increased in November in each region of the country, with the largest gains seen in the Midwest and South.

The index for current sales of single-family homes was one of the primary drivers of November’s HMI rise, up from 41 to 49. This brings the HMI closer to the threshold of 50, which marks the neutral point in the index where home builders are equally split between those who are either positive or negative about sales conditions. Looking forward six months, single-family sales should continue to grow modestly, with that index up from 51 to 53.

NAHB Chief Economist David Crowe noted the “substantial progress” made in the housing market over the past year, but he also observed that there continue to be headwinds in the sector. He writes, “At this point, difficult appraisals and tight lending conditions for builders and buyers remain limiting factors for the burgeoning housing recovery, along with shortages of buildable lots that have begun popping up in certain markets.”

Tomorrow, the Census Bureau releases new housing starts and permits data. Last month, both had unexpectedly large gains, with both near 900,000 units at the annual rate. I would expect for those gains to pull back somewhat, while continuing the longer-term trend upward. The consensus estimate for October housing starts is around 840,000 units. (continue reading…)

The U.S. economy continues to expand, with last week’s manufacturing and housing indicators showing progress. While the top-line industrial production figure was unchanged, manufacturing production rose a healthy 0.7 percent in January, led by strong growth in the durable goods sectors. Manufacturers are producing 4.7 percent more than one year ago, and capacity utilization rates also are up significantly. Similar findings were observed in the New York and Philadelphia Federal Reserve Bank regions, which showed expanding activity and mostly positive trends moving forward.

News from the housing market was also more upbeat. Housing starts rose to nearly 699,000 new units in January, and with some revisions, new residential construction topped 700,000 in November – the highest level since October 2008. These figures remain well below the levels of a few years ago, yet it is nice to see the trend line moving higher. Data from the National Association of Home Builders echo these findings, with its Housing Market Index up from 14 in September to 29 in January. Still, significant financial obstacles continue to challenge many would-be homebuyers and hold back growth.

Despite continued anxieties, the American consumer has begun spending again, with retail sales up 0.4 percent in January. This trend can also be seen in the pricing data. Higher traffic in restaurants and hotels, for instance, has helped to increase these costs. Both consumer and producer prices rose in January and were lifted by larger food and energy expenses. Yet, a mild winter has helped to mitigate the run-up in gasoline prices, with home energy costs lower. Inflationary pressures remain modest, despite the fact that core inflation remains above 2 percent.

This week, only a handful of economic reports will be released. In addition to some housing data, we will learn about manufacturing activity in the Kansas City Federal Reserve Bank region, and the Chicago Fed will likely highlight continued progress in the economy with its National Activity Index.

Chad Moutray is chief economist, National Association of Manufacturers.

The Census Bureau reported higher housing starts figures in January, up to 699,000 from a revised 689,000 in December. This increase stemmed from multi-family home construction, which rose from 176,000 to 191,000. Single-family new starts fell from 513,000 to 508,000 for the month, and the number of completions fell sharply. On the bright side, housing permits for single family residences were up slightly — a sign of progress moving forward.

Note that many of the data points for 2011 were revised upward. Overall starts in November, for instance, topped 700,000 for the first time since October 2008. These figures clearly show an upward trajectory, with total housing starts up nearly 10 percent year-over-year. Regionally, gains in the South and West were somewhat offset by less new residential construction in the Northeast and Midwest. For January, though, only the Midwest had declines.

This news mirrors similar data released yesterday by the National Association of Home Builders (NAHB). Its housing market index rose from 25 to 29. This represents a significant improvement in builder confidence in the past few months as the index was 14 in September. Single-family sales rose, and expectations are higher for the next six months.

NAHB Chief Economist David Crowe trumpets the positive trend, but he also cautions us to keep the numbers in perspective. “… it is important to remember that the HMI is still very low, and several factors continue to constrain the market. Foreclosures are still competing with new home sales, and many builders are seeing appraisals come in at less than the cost of construction. Additionally, prospective home buyers are finding it difficult to qualify for a mortgage.”

In other news today, the Philadelphia Federal Reserve Bank reports continued improvements in manufacturing activity in its region. The index of general business conditions rose from 7.3 in January to 10.2 in February. This is the fifth consecutive month of expanding production, with higher measures for new orders, shipments and the average workweek. The rate of job growth eased, though, and inventories were shrinking. (The latter is a positive sign of the increased activity.) Pricing pressures accelerated.

Looking ahead six months, the respondents remained very positive about future activity, but less so than last month. The expectations index of general activity fell from 49.0 to 33.3. This coincided with lower values for new orders, shipments and capital spending plans. But, employment measures were stronger, suggesting an increased willingness to hire additional workers in the coming months. I would not overplay the news that this figure declined by too much, however, as it mostly reflects a settling in of the overall improving trend. Only 12.9 percent of those taking the survey expect for activity to decline in the next few months.

Overall, the numbers released today and yesterday highlight a recovering economy, with manufacturing leading the way. Improvements in housing are also a welcome sign, even as the sector remains below its historical averages.

Chad Moutray is chief economist, National Association of Manufacturers.

The Census Bureau announced that housing starts declined from 685,000 in November (on an annual basis) to 657,000 in December, lower than many analysts expected. Despite the reduced figure, the larger trend remains positive. Housing starts were 526,000 in December 2010, for instance, with residential construction moving mostly upward since then.

Moreover, single-family home construction was a bright spot in these numbers, with new starts up from 450,000 to 470,000 for the month. This is the fourth consecutive month of improvements for new single-family home construction; prior to that, there was greater strength among multi-family units. Similarly, single-family housing permits – a leading indicator of future construction in the sector – were also higher. Total housing permits were virtually unchanged in December, down by just 1,000.

Multi-family starts and permits were lower, bucking their recent trends. Starts fell from 235,000 to 187,000 for the month, and permits were 9,000 units smaller to 235,000 in December. Still, the larger trend has been positive even with the recent volatility. In December 2010, there were 105,000 multi-family units started.

Much of the decline was region in nature, with particular weaknesses in the Northeast and West. The Midwest was the strongest region, with significantly higher starts for both single-family and multi-family housing; whereas, there were modest improvements in the single-family segment in the South. (continue reading…)

The Census Bureau reported that housing starts jumped from 627,000 in October to 685,000 residential units in November. Both single-family and multi-family units were higher, but multi-family starts increased the most. New multi-family residential construction rose from 190,000 to 238,000 for the month, its highest level since autumn of 2008. Meanwhile, single-family construction grew to 447,000 from 437,000 the previous month.

Regionally, only the Midwest is experiencing slower housing starts. The Northeast and West had the fastest monthly growth in new residential construction, with the South also higher.

Housing permits were also higher, up to 681,000 from 644,000, largely on strength in the multi-family residential sector. This bodes well for new construction moving into 2012. Total completions – a lagging indicator – fell 5.6 percent in November to 542,000 units.

Overall, these numbers are positive news to end the year on. The National Association of Home Builders released similarly upbeat news yesterday. A stronger housing market will be vital to the long-term health of the manufacturing sector and the overall economy, and recent data have tended to show the sector in edging higher. Given continuing weaknesses in the housing market and headwinds elsewhere, it is clear that there is still a long way to go, though.  

Chad Moutray is chief economist, National Association of Manufacturers.

The Census Bureau reported a 14.6 percent jump in housing starts in June, its largest monthly increase since January, with new residential construction up from 549,000 in May to 629,000 in June (All rates are in annual terms). This larger-than-expected gain is welcome news to an industry which has struggled for much of the past two years in a narrow range from 500,000 to 600,000. As a sign of future construction, housing permits also rose from 609,000 to 624,000, a gain of 2.5 percent.

The strongest gains in these numbers stemmed from multi-family housing, particularly those with five units or more, with starts up from 135,000 in May to 176,000 in June, or 30.4 percent. Likewise, multi-family housing permits rose 6.9 percent. Single-family construction numbers were also up 9.4 percent and 0.2 percent, respectively. In addition, housing starts were up in all regions of the country, led by strong gains in the Northeast and Midwest. Despite this good news, housing completions declined 1.7 percent from May to June.

This report contrasts with the Housing Market Index released yesterday from the National Association of Home Builders (NAHB) and Wells Fargo. While the HMI rose 2 points, from 13 in June to 15 in July, the overall index remains well below historic norms and (like the comparable Census measures) in the same narrow range for the past few years. It has been a range of 13 to 19 in every month since April 2009, for example, with the exception of May 2010 when the first-time homebuyer tax credit expired.

The Housing Market Index rose largely on increased single-family sales expected over the next six months, with that measure up from 15 in June to 22 in July. The index for potential buyers, though, was unchanged from the previous month. In terms of geography, the HMI rose in every region except for the Northeast.

These two reports – particularly the new figures from the Census Bureau on housing starts and permits – point to some optimism in the housing sector. While it is too early to say if one month’s numbers represent a trend (especially when starts have exceeded 600,000 before only to fall in the next month), we can hope that the rise in new starts and permits bodes well for future construction.

Chad Moutray is chief economist, National Association of Manufacturers.

John Engler, president and CEO of the National Association of Manufacturers, and Jerry Howard, president and CEO of the National Association of Home Builders, have an op-ed in today’s Wall Street Journal (subscription), “Tax Hikes and the Small Business Job Machine“:

Speaking at his first cabinet meeting after the midterm election, President Obama repeated his familiar call for extending the current tax rates for middle-class families. He also vowed to support business. “We’ve got to provide businesses some certainty about what their tax landscape is going to look like, and we’ve got to provide families certainty,” he said. “That’s critical to maintain our recovery.”

If Mr. Obama wants to help families, businesses and the recovery, then his course of action is clear: He should support the full extension of the 2001 and 2003 personal income tax rates that are now set to expire at the end of this year.

The American Petroleum Institute today hosted a panel discussion with three economists, Dave Crowe of the National Association of Home Builders (NAHB), John Felmy of API and David Huether of the National Association of Manufacturers (NAM).

API’s Jane Van Ryan has a report at the EnergyTomorrow blog, “Economists: Higher Taxes Could Harm Economic Recover.” Excerpt:

David Huether of NAM predicted that the “economy will be stuck in low gear for the second half of this year,” citing low consumer confidence and uncertainty over government policies. Although U.S. exports are up and 145,000 jobs were created largely in the first four months of 2010, economic growth is “lackluster.” Huether also cautioned that since manufacturers compete globally, “The last thing the government should do is add costs, raise taxes.”

API’s John Felmy also warned about government actions. “Policies are being proposed that drain money from the industry,” he said, referring to the administration’s plan to increase taxes on the oil and natural gas industry by $80 billion. John also said the failure to pass tax cut extensions could have a negative impact on small oil producers whose wells produce 2 barrels a day or less and provide jobs for about 125,000 workers. He said higher taxes, as well as the de facto offshore moratorium, could adversely impact domestic oil and natural gas supplies, energy security and job creation.