US: Housing starts unspectacular, yet remain solid - Wells Fargo

Housing starts reached 1.168-million unit pace (annual) in July, it represents a modest recovery after a sharp decline in June. While recent activity has been below expectations, builder confidence remains elevated, explained analysts at Wells Fargo. 

Key Quotes: 

“Total housing starts increased to a 1.168-million unit pace, rising 0.9 percent in July. Single family starts grew to 862,000, also a 0.9 percent gain. Starts of projects with five or more units increased 3.1 percent. While new units started in July came in below expectations for the second straight month, starts are still running 6.2 percent ahead of last year on a year-to-date basis.”

“New building permits also showed improvement during the month, growing 1.5 percent. However, the number of new homes completed fell 1.5 percent, owing to sizable drops in both the South and West. The fall in completions can likely be attributed to monthly noise, however unusually wet weather in the South may have also contributed to the slowdown.”

“That builders continue to express such a high degree of confidence in current market conditions supports our stance that housing starts will be stronger in coming months. While our expectations have been slightly scaled back recently, we still expect new residential construction to strengthen.”

“Lower material prices should allow builders to restart some of the stalled projects and keep residential construction trending higher.”