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By New_Deal_democrat September 21, 2016 10:57 am
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Housing cools off in August, but trend in starts is slightly improving
There have been a string of poor August reports following good July reports.  Yesterday's report on housing permits and starts continued the streak.
 
Last month I wrote that "Housing got hot in July,"
noting record high new home sales, and a good housing starts number.
 
Both permits and starts turned lower in August: 
 
 
The weakness in permits, as expected given the effects of last year's NYC program, has been in multi-unit dwellings, have single family dwellings have held up (but not improved): 
 
 
And here's what permits look like when we subtract the Northeastern region that includes NYC:
 
 
These have basically been flat all year.
 
Because housing permits have been distorted ever since a NYC program caused an anomalous spike in June 2015, starts - normally the more noisy series - have been more reliable since then.  Although it is barely perceptible from the first graph above, there has been a very slight uptrend in starts which is evident if we look at a three month rolling average:
 
2015:
Jun-Aug 1164
Jul-Sep 1153
Aug-Oct 1131LOW
Sep-Nov 1144
Oct-Dec 1134
2016:
Nov-Jan 1153
Dec-Feb 1167 
Jan-Mar 1151
Feb-Apr 1160
Mar-May 1132
Apr-Jun 1159
May-Jul 1178
Jun-Aug 1183 HIGH
 
After a poor Q4 2015, only once this year has the 3 month moving average of starts been under 1150. The last two months have made 2 successive new highs.  This is a slight trend, on the order of +2% YoY, but a trend nevertheless.
 
Now let's show how starts (blue) have compared with mortgage rates (red, invented, right scale):
 
 
It could always "be different this time," but generally interest rates lead housing.  Note that the downturn in mortgage rates in autumn 2014 presaged the increase in starts in spring 2015.  If the normal pattern holds, the new low mortgage rates this year should be feeding through into starts now, and perhaps that is what the 3 month moving average is beginning to show, despite the downward wiggle in August.
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