Sep 1, 2012

Housing Starts Decline in July, Ending Winning Streak

Single-family housing starts fell 6.5% in July from the month prior while multifamily starts jumped nearly 10%.As per the Census Bureau reported Thursday morning that single-family starts fell to a 502,000 seasonally adjusted annual rate in July from a 537,000 rate in June.

Prior to July, single-family starts moved up four months in a row. Starts have risen 17% from a year ago.

The Wells Fargo Securities Economics Group reported that much of the building is “partially built-out developments where land prices have fallen and new homes can compete with foreclosures in neighboring areas.”

There is also demand for smaller land parcels near key employment centers, but not in the outskirts of major housing markets that are still plagued by foreclosures and depressed house prices. “The implication is that the upside for single-family construction has a relatively low ceiling at least until jobs and income growth improves and a large proportion of the foreclosure pipeline is cleared,” according to WFS economists.They expect builders will start construction on 510,000 single-family homes this year, up 18.4% from 2011. In July, construction of multifamily units rose to a 229,000 seasonally adjusted annual rate from a 209,000 rate in June.Total housing starts were at 746 thousand (SAAR) in July, down 1.1% from the revised June rate of 754 thousand (SAAR). Note that June was revised from 760 thousand. Single-family starts decreased 6.5% to 502 thousand in July.This shows the huge collapse following the housing bubble, and that total housing starts have been increasing lately after moving sideways for about two years and a half years.Total starts are up 56% from the bottom start rate, and single family starts are up 42% from the low.

This was slightly below expectations of 750 thousand starts in July, but the key is starts are up solidly from last year. Right now starts are on pace to be up about 20% from 2011. Also note that total permits were at the highest level since 2008.Overall, multifamily construction is up 30% from July 2012. “The multifamily sector is a bright spot for new construction,” the WFS report says. “The demand for apartments is expected to remain strong over the next several years.”

What this means for contract processing companies like Privo Corporation (PrivoCorp) is to be seen (positive obviously!) -

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