On the face of it, this morning’s U.S. housing starts and permits report appears disappointing. However, a more encouraging picture emerges from a nuanced National Association of Home Builders (NAHB) blog post here. The NAHB notes that the driver behind the declines was multifamily apartment construction (down 7.6%), while “steady” single-family data is indicative of a gradual recovery that’s on track: “Single-family permits were up 3.7% to 619,000 (seasonally-adjusted annual rate), the highest since November 2013 and roughly equivalent to the output for all of 2013.” The NAHB attributes a 5.9% decline in single-family starts to a combination of factors including:

• cautious/conservative behaviour of homebuilders that persists after a six year decline in housing production
• low supply of developed lots
• labour/construction crew constraints
• supply chain difficulties which have caused builders to postpone and lengthen construction schedules.

The NAHB report concludes: “The number of single-family homes under construction has remained relatively steady at 340,000 for the past six months and the number completed just above 600,000 for the same period. The steadiness is evidence of builders continued conservative approach to adding inventory and the builders’ read of the same conservative nature of potential home buyers. As the economy continues to expand, consumer confidence in housing will return and the housing market will continue its modest expansion.”

“All the elements – the key drivers – are coming together as forecast. The only thing that’s been harder to predict is the pace of the recovery. U.S. housing markets are improving – but painfully gradually.”
– Mark Kennedy, CIBC