NEW YORK (Reuters) - Housing starts rose more than expected in June to touch a six-month high and permits for future construction unexpectedly increased, a government report showed on Tuesday, likely reflecting growing demand for rental apartments.
“It’s stronger than expected in starts and housing. But nevertheless despite this out-sized monthly gain, it really does not suggest a return to strong housing market. We are still very much bouncing along the bottom. We have seen this volatility here and there.
“While it certainly doesn’t suggest renewed weakness in the housing market it does not suggest we are turning a corner. When we look at the breakdown regionally, the majority of activity we saw was concentrated in the south. So I am wondering if there was some sort of seasonal factor, some sort of area specific factor that is driving that activity. We don’t see it throughout the country. Certainly something is driving demand down in the south. But it’s nothing to get too excited about. It is still a very tepid environment.
“There’s really not a reason to suspect that a long-awaited cyclical recovery is beginning now. We had a bigger month-to-month increase in January to a level a little bit higher than the level in June. In my view we’re still chopping around in a range that started a year ago.
“But it’s good news, it’s better than expected. I’ll take it.
“I do not think one can interpret the increase in starts this morning as the beginning of the far side of the ‘V’ in the cycle...but it certainly confirms that housing is not going to be a drag on GDP anymore in terms of housing construction. Again, starts have to start climbing at some point, but I can’t give you a good reason why it should be this month.
“Housing construction going forward is stable to higher, not stable to lower.”
ALAN LEVENSON, CHIEF ECONOMIST, T. ROWE PRICE, BALTIMORE, MD
“They’re volatile data and our view has been that over a long period of time, housing starts have to just about double to keep up with where our population is going to be. An oversupply of vacant units that’s suppressing our recovery.”
“This is not necessarily the new trend. My general characterization of housing is that it’s overly stagnant. In our forecast, we have very little growth in housing starts over the next 18 months, especially after such a deep recession. This is certainly good news, and it will help growth prospects at least at the margin in the near term. But housing is such a small part of the economy, so not going to have huge implications.”
“The level that we’ve gotten to is back about to where we were in January of this year.”
“It’s a positive surprise in the economic data, something positive from what’s been a beaten down sector, I think what’s going on in Europe and Washington will have greater potential to move markets than housing starts numbers.”
TOM PORCELLI, U.S. ECONOMIST, RBC CAPITAL MARKETS, NEW YORK
“You take the good news when you can get it, because there hasn’t been much of it. While this beat is sizable and the first since January, context is everything. We’re only at the top of recent lows. This doesn’t change our call on residential construction one bit.
“I think the bond market is focused elsewhere. You have this house vote today, you have continuing, lingering focus on the debt ceiling. You hear it come up in conversations. No one wants to be caught flat-footed. Depending on how this unfolds, you don’t want to put on any sizable short or long positions.”
DAVID MANN, SENIOR CURRENCY STRATEGIST, STANDARD CHARTERED, NEW YORK
“In the grand scheme of things, it’s nice to see it jump higher, but it doesn’t take us out of the range we’ve been in. So there’s still an extremely long way to go before we can be sure there’s a serious recovery underway. It’s good to see but we need to see a lot more of this for a good few months before we become less concerned about the housing market.”
DAVID SLOAN, ECONOMIST, IFR ECONOMICS, A UNIT OF THOMSON REUTERS
“June housing starts and permits with respective gains of 14.6%, to 629k, and 2.5%, to 624k, both comfortably exceeded consensus expectations, which stood at 580k for starts and 600k for permits. The signs of recovery are only persuasive in the multiples sector, though June’s rise in starts was broad based. The latest data looks a little stronger than several recent surveys, particularly a very weak June NAHB homebuilders survey, the dip in which was only partially reversed in July. The data provides comfort in that it suggests housing is not going to be a significant negative in upcoming GDP data, assuming debt default is avoided. However, we will need to see substantially improved data from home sales before housing plays a significant part in the recovery.”