Michael Gapen

This report paints a mixed picture on the state of the housing market; the numbers are not indicative of a further leg down in housing activity, as some had feared, but suggest that the market is still trying to find its feet after the expiration of the homebuyer tax credit in April.

Housing starts increased 1.7% in July, to 546,000, up from a revised 537,000 in the previous month (prior: 549,000). The level of starts was below our (565,000) and consensus (560,000) estimates, although the m/m percent increase was generally in line with consensus.

The increase in the level of starts in July was driven solely by an increase in the volatile multi-family component, which rose 32.6% m/m to 114,000 from 86,000 the previous month. Single family starts were down 4.2% in July and single family starts for June was also revised to show a larger 1.7% m/m decline (previous: -0.7%).

After these revisions, single family starts have now declined three consecutive months and suggest that the housing market is still looking for a bottom. Regionally, declines in starts were localized in the South (-6.3%) while the West was flat and the Northeast (30.5%) and Midwest (10.7%) exhibited strong increases.

Building permits were also soft in July, falling 3.1% to 565,000 and came in below consensus (580,000) estimates. Declines in permits were observed in both multi-family (-8.0%) and single family (-1.2%) units. Building permits for single family homes have declined in four consecutive months.

source: BarCap