Daily Economic Update: Housing Starts

Each day the Research staff takes a look at recently released economic indicators, addressing what these indicators mean for REALTORS® and their clients. Today’s update highlights housing starts.

• Single family housing starts fell 4.9% in July from June’s sharp monthly increase, which was downwardly revised.  Given how rocky consumer and business confidence was in July the soft July number and the June revision are not a surprise.  Single family construction is roughly the same as last year at just 0.9% down.  Permits for new single family construction are also depressed having eased 3.2% in July and down 1.2% compared to last July reflecting weak builder confidence.
• Multi-family construction has been on a tear, though.  Starts for multi-family projects are up 7.8% from last month and 47.9% from last year.  The weak economy, tight lending and credit problems in the wake of the housing bust have driven up demand for rental units as well as construction of new rental units.
• Industrial production jumped 0.9% in July led by a strong 0.6% increase in manufacturing, the 3^rd consectuive increase.  Production of of both consumer and business goods rose this month.  Auto production surged 5.9%, while electronics rose 0.8%, but home furnishing remain a lackluster 0.2%
• The residential construction sector remains bogged down by tight lending, weak consumer confidence, high unemployment and regional issues of large supply.  However, the rental sector is likely to grow in the coming years and builders are responding.  The tepid rate of production of single family product will help to limit supply and stabilize prices, but it is a drag on job creation.  On an upbeat note, today’s figures on industrial production suggest that businesses are ratcheting up production, a positive sign for economic growth in the 2^nd half of 2011.