June housing starts, in an unexpected sign of hope and strength, jumped 14.6% from May 2011 and are 16.7% above their level of June 2010. Total starts were 629,000 compared to most expectations of about 575,000 and the revised May 2010 level of 549,000. Single family home starts in June were 453,000, up 9.4% from May’s revised 414,000 pace. Permits — seen by some as a leading indicator — were 524,000 in June, up 2.5% from May. Privately owned housing completions were 535,000, down 1.7% from May.
Up 16.7% is better than flat or down but it is probably much too early to celebrate any rebound or revival. The best description of the last two and a half years of housing starts is bouncing along a bit over 500,000 units — nothing in today’s numbers changes that. In the run-up to this morning’s report there were stories that apartments are over taking single family homes and that household formation is falling across the US so that housing will never recover. While such ideas are over stated, today’s report reflects short term economic conditions much more than any long term trends. Apartment starts — actually five or more units in a structure — did grow much faster than single family homes. However, this is typical of periods of slow economic activity or high interest rates. Household formation did slow in recent years and this too is the economy more than long term demographics. In short, enjoy the better news on starts, don’t believe housing is about to rebound to over one million starts but don’t write it off for the next fifty years either.