January Housing Starts

Updated 12-Feb-07 09:53 ET

About this release

Highlights

Briefing.com Forecast: 1.590 mln starts, 1.570 mln permits
Market Consensus: 1.600 mln starts, 1.590 mln permits

Key Factors

A decline is expected in January tied to colder weather and the inflated 11% gain over the prior two months.
Growing stability is clear after the 6 year low of October as permits ended the 10 month string of declines in December.
Largest declines expected in the Northeast (3 mo gain of 43%) and West.
The large supply of inventory (unsold homes) is the hurdle ahead as new construction awaits demand.
National Assoc of Realtors expects starts to bottom in Q2 2007.
January starts expected to be 30% below the 33 year peak of a year earlier.
January permits expected to fall off after the revised 6.6% December gain.

Big Picture

The housing market has fallen sharply from the highs seen in 2005. As mortgage rates rose, underlying demand and speculative investment faded as sales declined, inventory built and strong price growth turned to declines. The correction for the inflated housing market was expected (and needed) but with a more gradual decline as starts have fallen -28% from January's 33 year high. Fixed long term mortgage rates now in the low 6%'s and downward price pressure on homes leave sales finding some stability as a return to positive contruction waits for the huge supply of unsold homes to be thinned. National Assoc of Realtors expects the bottom in housing starts in Q2 2007.

Category	Jan	Dec	Nov	Oct	Sep
Starts	1.590M E	1.642	1.572	1.478	1.724
1 Unit		1.230	1.282	1.187	1.393
Multi Units		.412	.290	.291	.331
NE		.196	.156	.147	.137
MW		.229	.225	.235	.269
S		.827	.844	.715	.938
W		.390	.347	.381	.380
Permits	1.570M E	1.613	1.513	1.553	1.638

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Release Details

Housing Starts and Building Permits

Importance (A-F): This release merits a B-.
Source: The Census Bureau of the Department of Commerce
Release Time: 8:30 ET around the 16th of the month (data for one month prior).
Raw Data Available At: http://www.census.gov/const/www/newresconstindex.html.

Housing Starts are a measure of the number of residential units on which construction is begun each month. A start in construction is defined as the beginning of excavation of the foundation for the building and is comprised primarily of residential housing. Building permits are permits taken out in order to allow excavation. An increase in building permits and starts usually occurs a few months after a reduction in mortgage rates. Permits lead starts, but permits are not required in all regions of the country, and the level of permits therefore tends to be less than the level of starts over time.

The monthly national report is broken down by region: Northeast, Midwest, South, and West. Briefing recommends analyzing the regional data because they are subject to a high degree of volatility. The high volatility can be attributed to weather changes and/or natural disasters. For example, an unexpectedly high level of rain in South could delay housing starts for the region.