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Home Construction Holds Up
Housing starts data out this morning supports yesterday's modest increase in the NAHB's Housing Market Index. While overall headline starts were down 4.8% month to month in May, the decline was due to volatility in apartments and condos; single family units increased by 3.2% to 516k. Meanwhile, permits for single family construction were up 4.0%. Again, we will say that it's somewhat of a surprise that building activity has been able to increase amid the global market scare. However we will also reiterate that a lot of the support for new home construction comes from the fact that, believe it or not, supply is low in some regions including California. The pace of completions actually slowed by 4.8% to 598k, indicating that there was some room to increase construction plans.
We are somewhat encouraged by the confidence homebuilders have, but we are still lacking solid evidence on the demand side. The single family starts data shows that activity was up in the West and South, but down in the Northeast and Midwest. Again, this supports the idea that supply is lacking in some regions, but demand still could have decelerated. But still, the fact that starts and permits held up at all is a little encouraging considering the global circumstances and given the nice upside moves in homebuilding stocks over the past couple of days, you could say the Street was looking for more damage.
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