Stable Housing

The latest reads on Housing Starts and Building Permits for the month of June were released earlier this morning and showed mixed results relative to expectations (starts slightly better than expected, permits modestly weaker). The table below breaks down the report by single and multi-family units as well as on a regional basis. Two notable trends that stand out in the table concern single-family vs multi-family and regional trends. First, for both starts and permits, single-family was stronger than multi on both a m/m and y/y basis. Single-family units have more of an economic impact, so it’s good to see strength on that score. On a regional basis, we found it interesting to see that while most regions of the country experienced double-digit y/y increases in starts, permits in all-four regions were down by at least 9% on a y/y basis which would suggest that the pipeline for future starts is getting smaller.

Below are a couple of notable charts worth highlighting from the report. On a 12-month average basis, both Housing Starts and Building Permits are down sharply from their early 2022 peaks, but the last few months have seen some stabilization in the pace of starts. Permits, meanwhile, remain stuck in their trend, and based on the current pace and where they were last fall, we’re unlikely to see any stabilization in this reading over the course of the next few months.

Last but not least, the chart below compares the trend in Housing Starts over a three-month rolling basis to the performance of homebuilder stocks as tracked by the iShares Home Construction ETF (ITB), and it provides a great example of how the market is always looking past the headlines. Even as Housing Starts continued to crater in the middle of 2022, homebuilder stocks began what looked like an inexplicable rally, but just as stocks in the group peaked ahead of the peak in Housing Starts in April 2022, they also bottomed well before the February low.

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Disclaimer: Bespoke Investment Group, LLC believes all information contained in this report to be accurate, but we do not guarantee its accuracy. None of the information in this report or any ...

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