Housing Starts and Building Permits for July were a mixed bag with Housing Starts exceeding expectations (1.206 mln vs 1.180 mln) and Building Permits missing consensus forecasts (1.119 mln vs 1.225 mln). The weakness in permits was primarily due to the expiration of tax incentives in New York, which we flagged in the commentary to our Morning Lineup sent out to Bespoke Premium clients before the report. In that commentary we noted that, “Most economists are expecting a decline in building permits driven by the end of a tax subsidy in New York State; while this may be a headwind we would note that building permits continue to trend demonstrably higher even after stripping out New York State.” The “New York” effect can clearly be seen by the 60.2% decline in m/m permits for the northeast (see table below).
As shown in the top chart of Housing Starts, July’s seasonally adjusted annualized rate of 1.206 million marks a post-recession high and is the best monthly reading since October 2007. Even more encouraging about this month’s reading is that the strength was driven primarily by single family units, which are generally considered to have more of a positive economic impact than multi-family units. On a m/m basis, single family starts increased 12.8%, while on a y/y basis, they increased 19%. Looking at the regional breakdown of the y/y change in overall Housing Starts (+10.1%), every region but the West saw growth of more than 10%.
On the surface, July’s 16.3% m/m decline in Building Permits looks weak, but they are still up 7.5% y/y. Also, keep in mind that this month’s decline comes on the heels of a 29% spike in the prior three months. As the second chart below shows, even after this month’s pullback, Building Permits are still well above the range they were in prior to the recent spike.