Voila! Housing Growth

The detractors of the real estate market have enjoyed complaining about the downturn for about as long as they had bought into the bubble. No matter what I say or write, they will continue to point to every negative factor that weighs on the housing market. Only when growth materializes and it is announced and reconfirmed by the popular press, then will the naysayers change their tune. Well, voila! I present housing growth!

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Voila! Housing Growth

Today’s release of the May Housing Starts data offered a clear message; it was a message of transition. That’s because as you look across the data points within the government’s release, from past to present to forward looking, there is a clear trend illustrating improvement. First, let’s examine the past. Housing Completions posted only a slight increase of 0.4% over April, to an annual rate of 544K. Still, Completions were dramatically 22.5% lower than last year’s comparable period. So there was little month-over-month growth and significantly deteriorated year-over-year change, thus feeding the fodder of the housing hounds, who I am sure are thrilled to be the theme of this article (looking forward to your comments friends). We should note that single-family completions (excluding multi-family structures) increased 2.9% over April. Thus, even in the past activity we see the beginnings of growth as it materializes in sequential month comparisons.

As we move into the present, examining Housing Starts, we see 3.5% monthly growth to a rate of 560K in May. Not only did Housing Starts exceed April’s pace, but they exceeded the economists’ consensus estimate for 547K starts as well. That said, it’s the yearly comparisons that the hounds holler about, and Starts were still 3.4% below the prior year rate of 580K. You’ll recall that last year’s activity got a boost from the First-Time Homebuyer Tax Credit, which I’m sure you are getting tired of hearing about. Well, good news, the tax credit will no longer come into play moving forward. Likewise though hounds, housing growth will begin on a year-over-year basis. Before we move forward to the latest evidence that this prediction is coming true, we should note that single-family housing starts rose 3.7% above April’s rate.

This is the best news of all. Housing units authorized by permits, which represent future housing starts and the revival of the housing market, increased 8.7% in April to an annual rate of 612K. Permits for single-family homes also increased by 2.5% to 405K in April. Now, unlike with Starts and Completions, permitting activity improved 5.2% over May of 2010. Voila! Housing growth!

This means that over the months ahead, we should see housing starts and housing completions begin to post year-over-year growth rates. It’s not a difficult task either, given that the absolute level of activity was pitiful in the second half of last year. Still, it marks a change for the real estate market and looks strong enough to compile full year growth for 2011. So, just as I outlined yesterday, the shares of homebuilders are rejoicing early. Toll Brothers (NYSE: TOL) was up 1.3% deep into afternoon trading, with Hovnanian (NYSE: HOV) up 3.6%, Pulte Homes (NYSE: PHM) up 1.6%, D.R. Horton (NYSE: DHI) up 2.3% and K.B. Homes (NYSE: KBH) up 1.7%. Voila!



Editor's Note: Article should interest investors in Investors Title (Nasdaq: ITIC), Bank of America (NYSE: BAC), Freddie Mac (OTC: FMCC.OB), Fannie Mae (OTC: FNMA.OB), Goldman Sachs (NYSE: GS), Morgan Stanley (NYSE: MS), Wells Fargo (NYSE: WFC), Toronto Dominion (NYSE: TD), UltraShort Real Estate ProShares (NYSE: SRS), Ultra Real Estate ProShares (NYSE: URE), ING Clarion Global Real Estate Income Fund (NYSE: IGR), Xinyuan Real Estate Co. (NYSE: XIN), Rydex Real Estate Fund H (Nasdaq: RYHRX), T. Rowe Price Real Estate Fund (Nasdaq: TRREX), Toll Brothers (NYSE: TOL), Hovnanian (NYSE: HOV), D.R. Horton (NYSE: DHI), Beazer Homes (NYSE: BZH), Lennar (NYSE: LEN), K.B. Homes (NYSE: KBH), Pulte Homes (NYSE: PHM), NVR Inc. (NYSE: NVR), Gafisa SA (NYSE: GFA), MDC Holdings (NYSE: MDC), Ryland Group (NYSE: RYL), Meritage Homes (NYSE: MTH), Brookfield Homes (NYSE: BHS), Standard Pacific (NYSE: SPF), M/I Homes (NYSE: MHO), Orleans Homebuilders (AMEX: OHB), Vanguard REIT Index ETF (NYSE: VNQ), PNC Bank (NYSE: PNC), J.P. Morgan Chase (NYSE: JPM), Hooker Furniture (Nasdaq: HOFT), Ethan Allen (NYSE: ETH), Pier 1 Imports (NYSE: PIR), Williams Sonoma (NYSE: WSM), Home Depot (NYSE: HD), Lowes (NYSE: LOW), Nasdaq: XNFZX, Nasdaq: FSAZX, Avatar Holdings (Nasdaq: AVTR), Apartment Investment & Management (NYSE: AIV), Equity Residential (NYSE: EQR), Avalonbay Communities (NYSE: AVB), UDR Inc. (NYSE: UDR), Essex Property Trust (NYSE: ESS), Camden Property Trust (NYSE: CPT), Senior Housing Properties (NYSE: SNH), BRE Properties (NYSE: BRE), Home Properties (NYSE: HME), Mid-America Apartment (NYSE: MAA), Equity Lifestyle Properties (NYSE: ELS), American Campus Communities (NYSE: ACC), Colonial Properties (NYSE: CLP), American Capital Agency (Nasdaq: AGNC), Sun Communities (NYSE: SUI), Associated Estates (NYSE: AEC), PennyMac Mortgage (NYSE: PMT), Two Harbors (AMEX: TWO), Simon Property Group (NYSE: SPG).

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