Merk Investments: Housing Starts (May)
New starts in the housing industry declined to the lowest levels since March of 1991. The May estimate of housing starts arrived well below market expectations at 975K, just above our forecast of 970K, vs. the revised1.008m.n for April. Building permits did a bit better than expected, coming in at 969K, above expectations of a 960K print. On a regional basis, starts declined in three of the four major regional areas. In the Midwest, new construction declined 25%, in the West 10% and in the South by 4.4%. On the northeast saw an increase in starts.
The April housing starts data ushered in a round of new calls that the bottom in the housing market was either near or at hand. Not so fast, my friends. The April data was driven by the always-volatile multi-family dwellings category. In May, the overall downward trend in the data reasserted itself and the market observed the worst month of starts in over 17 years. Starts of single-family residences declined -4.3% and is indicative of the yet incomplete correction in the housing sector. The combination of an elevated level of existing stock on the market, falling values of real estate assets, the sharp increase in foreclosures and rising mortgage rates will continue to depress residential construction and the macroeconomic pain will linger on well into 2009.
Joseph Brusuelas
Merk Investments
Chief Economist/VP Global Strategy
|
