Rise in building permits lifts outlook for housing - Trade Only Today

Rise in building permits lifts outlook for housing

The U.S. housing industry sent generally positive signals last week, and that has implications for everyone who sells goods and services to homeowners, including boatbuilders and their dealers.
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The U.S. housing industry sent generally positive signals last week, and that has implications for everyone who sells goods and services to homeowners, including boatbuilders and their dealers.

The Commerce Department said early in the week that housing starts dropped 6.8 percent, to a four-month low in March, but the National Association of Realtors said Friday that existing-home sales rose 4.4 percent for the month, to a 10-year high.

Separately, a monthly survey of home builders showed that their confidence slipped slightly in April, but from a March reading that was an 11-year high.

Residential housing starts declined in March to a seasonally adjusted annual rate of 1.22 million from 1.3 million the previous month, although building permits, a harbinger of future construction, rose 3.6 percent to an annualized rate of 1.26 million.

"The real gem of March's report was building permits, which boomed 17 percent year over year," Ralph McLaughlin, Trulia's chief economist, said in a note that Business Insider quoted. "Permits are important because they are the earliest signals of long-run new housing supply, so any significant movement is something to take note of. Home buyers should rest assured that new home building will continue to relieve their supply constraint in the long run."

The home resales report was unabashedly positive. Sales rose to a seasonally adjusted annual rate of 5.71 million units, the highest level since February 2007.

Lawrence Yun, chief economist of the National Association of Realtors, said sales were led by hefty gains in the Northeast and Midwest. The only region where sales declined was the West.

"The early returns so far this spring buying season look very promising, as a rising number of households dipped their toes into the market and were successfully able to close on a home last month," Yun said in a statement.

"Although finding available properties to buy continues to be a strenuous task for many buyers, there was enough of a monthly increase in listings in March for sales to muster a strong gain. Sales will go up as long as inventory does."

The survey of home builders — the National Association of Home Builders/Wells Fargo Housing Market Index — dropped three points to 68, but the association said builder confidence in the single-family-home market remains solid. Any reading above 50 on the index is considered positive.

“Even with this month’s modest drop, builder confidence is on very firm ground, and builders are reporting strong interest among potential home buyers,” association chairman Granger MacDonald, a homebuilder and developer from Kerrville, Texas, said in a statement.

“The fact that the [Housing Market Index] measure of current sales conditions has been over 70 for five consecutive months shows that there is continued demand for new construction,” association chief economist Robert Dietz added. “However, builders are facing several challenges, such as hefty regulatory costs and ongoing increases in building material prices."

Other data of note last week included the Federal Reserve’s Beige Book report, which said economic activity increased in each of the 12 Fed districts between mid-February and the end of March.

“Manufacturing continued to expand at a modest to moderate pace, although growth in freight shipments slowed slightly,” the Fed said. “Consumer spending varied, as reports of stronger light-vehicle sales were accompanied by somewhat softer readings in non-auto retail spending.”

The central bank said employment rose and labor markets remained tight.

“Modest wage increases broadened, and reports noted bigger increases for workers with skills that are in short supply,” the Fed said. “A larger number of firms mentioned higher turnover rates and more difficulty retaining workers.”

The survey also found that “on balance, prices rose modestly since the previous report.”

On Thursday, The Conference Board said its Leading Economic Index rose 0.4 percent in March.

"The March increase and upward trend in the U.S. LEI point to continued economic growth in 2017, with perhaps an acceleration later in the year if consumer spending and investment pick up," Ataman Ozyildirim, director of business cycles and growth research at The Conference Board, said in a statement.

"The gains among the leading indicators were very widespread, with new orders in manufacturing and the interest rate spread more than offsetting declines in the labor market components in March."

Today, economy watchers will see the March report from the Commerce Department on new-home sales and The Conference Board’s Consumer Confidence Index for April. On Friday the University of Michigan will release its final Consumer Sentiment Index for April.

All three will be important at a time of year when many people look for new homes and consumers typically emerge from relatively dormant winter spending patterns to consider home improvements and other activities.

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