New Residential Construction is Flat in August 2010

According to government statistics, new residential construction is up in August 2010. The headlines from the press release:

The U.S. Census Bureau and the Department of Housing and Urban Development jointly announced the following new residential construction statistics for August 2010:

BUILDING PERMITS

Privately-owned housing units authorized by building permits in August were at a seasonally adjusted annual rate of 569,000. This is 1.8 percent (±2.0%)* above the revised July rate of 559,000, but is 6.7 percent (±1.4%) below the August 2009 estimate of 610,000. Single-family authorizations in August were at a rate of 401,000; this is 1.2 percent (±1.0%) below the revised July figure of 406,000. Authorizations of units in buildings with five units or more were at a rate of 150,000 in August.

HOUSING STARTS

Privately-owned housing starts in August were at a seasonally adjusted annual rate of 598,000. This is 10.5 percent (±11.9%)* above the revised July estimate of 541,000 and is 2.2 percent (±9.7%)* above the August 2009 rate of 585,000. Single-family housing starts in August were at a rate of 438,000; this is 4.3 percent (±12.4%)* above the revised July figure of 420,000. The August rate for units in buildings with five units or more was 147,000.

HOUSING COMPLETIONS

Privately-owned housing completions in August were at a seasonally adjusted annual rate of 603,000. This is 5.6 percent (±12.6%)* above the revised July estimate of 571,000, but is 23.7 percent (±9.6%) below the August 2009 rate of 790,000. Single-family housing completions in August were at a rate of 482,000; this is 1.3 percent (±12.0%)* above the revised July rate of 476,000. The August rate for units in buildings with five units or more was 115,000.

The headlines are misleading, and require context for proper interpretation. The unadjusted data:

As the unadjusted data shows – permits, housing starts, and completions are up MoM.

The graph above is just for permits, but the same seasonality exists in starts and completions – the data is usually up in August. Overall, it is hard to argue that the data is trending up so the call is the data is flat or unchanged MoM.

But the truth is revealed in the data breakdowns – single home statistics are down, level or barely up MoM. Overall, single family new construction is not yet recovering. But multifamily (5 units or more) / Apartments are up showing an obvious trend.

This chart reflects what is occurring in starts and completions.

My opinion is that although apartments are not a significant portion of new construction, it is the first element to show signs of life.  Likely this reflects the trend away from home ownership towards rentals.

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