Merk Investments: Housing Starts

On a seasonally adjusted basis housing starts for the month of August declined to 895K and building permits fell to 854K. Starts of single family residences declined to 630K and muti-family dwellings dropped to 265K. Total units under construction dropped to 947K, below its three-month average of 960K. Units completed in August also declined to 961K, well below the 1.331 million that were completed in January of 2008.

On a regional basis, starts declined -15% in the Northeast, -14% in the Midwest and -7.4% in the South. The West saw a 11% increase in starts for the month.

Within the context of tight credit and lending, the development community continued to reduce the quantity of starts. The number of units completed in August was the lowest since September of 1982 and the trend in starts tends to support the market should see a bottom in the data in early 2009. However, given the recent development in credit markets over the past several days the development community should expect capital to begin new starts to be constrained and the risk over the next few months will be to the downside. This will put further pressure on an already diminished economic outlook for the U.S. over the next few months.

This report was prepared by Merk Investments LLC, and reflects the current opinion of the author. It is based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any investment product, nor provide investment advice. Merk Investments does not own any of the stocks mentioned; this is not an offer to buy or sell any security mentioned.

Merk Investments: Housing Starts: August 2008