Did You Notice the Housing Growth

The latest Housing Starts data from the U.S. Census Bureau's Department of Housing and Urban Development showed housing market growth against the prior year period. That is the growth that I have been forecasting here against a tidal wave of criticism for nearly a half year now. There it is, manifest before you, so deal with it detractors!

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Did You Notice the Housing Growth?

Through most of this year, I’ve been forecasting the turn in housing that is unfolding now before the eyes of all. Yet, I’ve faced a tidal wave of criticism from the herd, the same cattle that bought deep into the real estate bubble when I was screaming warnings to deaf ears. So, as the government reports the turn from contraction to growth, I’m making sure to remind detractors where they heard it first.

The Housing Starts data for July showed a 1.5% decline versus June of 2011, but the level of activity at an annual pace of 604K, still measured 9.8% higher than last year. The prior year comparables have suddenly gone from challenging to easy game. That’s certainly due to the expiration of the tax credit program in the spring of 2010, and the absence of incentive driven activity in the 2010 comps now.

As you can see by the month-to-month comparison, which is seasonally adjusted, it does not reflect a generally robust recovery in housing. But, it does reflect growth, a point I tried desperately to make time and again this year. More recently, I have been qualifying those growth forecasts for the full year of 2011 to the risk of political bumbling with regard to the debt ceiling and the risk of US sovereign debt rating downgrade. Thus, it is now unclear whether the remainder of the year will be strong enough to provide for full year growth, but it will be close to it. I think I can say with certainty that the second half of this year will provide growth over the second half of 2010 across housing metrics.

Take note also of the Building Permit results, which indicate activity is still on pace for gains. In July, Building Permits ran at an annual rate of 597K, 3.2% short of the revised June level of activity, but still 3.8% better than July of last year. Housing Completions also performed well on a year-over-year basis, running at an annual rate of 636K, which was both above this June (569K) and last July (581K).

It’s important to note as well that single-family home construction, excluding multi-family projects, performed relatively well. While Starts were 4.9% below June’s activity, Permits ran 0.5% higher and Completions were 6.1% above the previous month.

On a regional basis, the best Housing Starts news was seen in the Northeast region of the country. Starts were up 34.7% over June, and 27.6% over last July, but much of the gains were in multi-family projects. Single family starts increased 7.5% over June, but were down 15.7% against last July in the congested Northeast. However, permitting was down in the Northeast, except for in single-family projects. Permits were 18.3% lower than June, while 7.9% short of July of last year. Single family project permitting was up 2.9% against June, but down 16.3% against July of 2010.

Starts activity was especially soft in the Midwest, where they measured 37.7% short of June of this year and 17.4% below July of last year. Single family starts were down 22.6% against June and 14.5% against July of last year. Starts in the West and South were less robust in change, with the South seeing a 5.6% increase and the West seeing a 3.0% decrease.

The big take-away from the report was missed by every major publisher, that we have turned the corner in housing. We will come close to seeing yearly growth for 2011, and we will certainly see the second half of this year outpace the second half of last year. Whether housing double-dips in the near-term or not may be more closely tied to the government’s inability to provide further stimulus to a still ill economy. In other words, recession renders all housing bets void.

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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