Data on residential housing this morning surprised to the upside at the headline level in terms of both Building Permits and Housing Starts. Despite the better than expected results, the internals of the report weren’t great as all of the strength was in multi-family units. In fact, single-family Building Permits were only up 0.6% m/m and were down -0.1% y/y compared to a m/m gain of 15.8% and a y/y gain of 44.3% in multi-family permits. Similarly, single-family Housing Starts actually declined 2.8% m/m and only increased 5.2% y/y compared to multi-family units which rose 20.6% m/m and 52.7% y/y. An increase in multi-family units isn’t necessarily considered a bad thing, but single-family units tend to have more of an economic impact.

Overall, Housing Starts are still trending higher. On a 12-month moving average basis, Housing Starts have been surging in recent months and just came in at the highest level since May 2007.Housing data tends to roll over well in advance of recessions, so as long as Starts keep trending higher, it’s a sign of economic strength.

Looking more closely at single-family Building Permits and Housing Starts, the 12-month moving average of this metric has actually been starting to flatten out in recent months. Housing has been a pillar of the economy in the post-pandemic rebound, so this will bear watching going forward.

It’s always interesting to see how closely homebuilder stocks tend to track trends in Housing Starts, which we show below. Similar to the stall out in starts, we’ve also seen the iShares Home Construction ETF (ITB) start to stall out over the last few months.