The US Census Bureau released August housing starts data this morning which showed a 598,000 (seasonally adjusted annualized rate) rate of starts. The August rate was 1.5% higher than July’s 589,000 figure, but still 29.6% below the August 2008 rate of 849,000.

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Zacks.com submits:

The August data on Building Permits and Housing Starts show a slight increase for both nationwide, but the gains all came from multi-family structures, primarily in the Northeast. Both the total permits and the total starts numbers were in line with consensus expectations.

Looking first at permits, the nationwide total rose to a seasonally adjusted annual rate of 579,000, a 2.7% increase from 564,000 in July, but 32.4% below a year ago. The Northeast was by far the strongest region with a 14.3% monthly increase, but that still left it 24.7% below year ago levels.

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Tim Iacono submits:

The Census Bureau reported(.pdf) housing starts and permits for new construction rose to their highest level in nine months, however, homebuilding remains at historically low levels.
U.S. housing starts rose from an upwardly revised annual rate of 589,000 in July to 598,000 last month, down 29.6 percent from a year ago and a full 74 percent below the peak of homebuilding activity in January 2006.

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Tom Lindmark submits:

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Housing starts showed an unexpected decrease in the month of July, according to a report released by the Commerce Department on Tuesday, with the data likely to lead to some renewed concerns about the outlook for the housing market.

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Last week the Commerce Department announced an unexpected 3.6% increase in housing starts in June. The 582,000 units started last month is a solid gain from May’s 562,000 and much than the 532,000 analysts had been expecting. The increases were concentrated in  single-family homes which were up 14% — the biggest rise since December 2004. Housing permits were also up; the 8.75 increase was the largest gain in a year.

This would seem to be good news. A sure sign that more people are buying or commissioning homes and that developers expect this trend to continue. However developers have guessed very wrong in the very recent past. (See Florida, Phoenix, Las Vegas and the Case/Schiller index for examples.)

Many economic indicators suggest developers haven’t suddenly become a lot better in predicting the economy:

• The nation currently has more housing stock than it needs. That is why the price of existing houses is going down. More stock continues to be placed on the market at lower prices each month by investors desperate to get anything back on their investments.
• While the increase in the number of people claiming unemployment benefits nationally has slowed slightly (up only .1% in June) it is difficult to see that as a reason to build more homes.
• Mortgage delinquencies have continued to increase. The most recent FHA numbers showed approximately 71,700 more loans became 60 days or more delinquent in April. Loans 60-plus-days delinquent increased approximately 7% that month to 1.2 million.
• Commercial real estate prices dropped 7.6% in May. So it hardly seems that businesses are about to expand or staff back up.
• Companies that sell to the construction trade are not optimistic about the coming year. Caterpillar announced dealer inventories had been cut $1.5 billion in the first half of 2009 and the company expects that to continue. The reasons: “Factors depressing construction included high inventories of unsold homes, lower selling prices and continued stringent standards for mortgage qualification.”

So why the increase? As with so much economic activity these days the cause seems to be wishful thinking. Developers think first time home buyers are going to flood the market before the Dec. 1 end to a federal program offering first-timers an $8,000 tax credit.

While there are undoubtedly a number of wise families who have kept their financial powder dry and will be able to take advantage of the federal aid, why would they buy a house that has either just been completed or is about to be? They are understandably going to want to get the most for their money. Why would they choose brand new construction over very recently brand new – for less money?

Housing starts are frequently referred to as a leading economic indicator. Perhaps we should change that to a leading economic prayer.

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1. Housing starts go up in February and no one knows why
2. Housing Starts Jump in April
3. Home builder confidence up as housing starts fall off a cliff

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1. Housing starts go up in February and no one knows why
2. Housing Starts Jump in April
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These guys who write newspaper headlines are getting me down. Here’s the Wall Street Journal‘s online head: "Housing Starts Jumped in June."

Bloomberg proclaims: "Housing Starts in U.S. Unexpectedly Climb to Highest Level in Seven Months"

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Crude oil prices were higher Friday as demand hopes rose after the US Labor Department reported that new home starts in the United States were up by 3.6 percent in June.
August contracts for West Texas Intermediate crude added $1.54 to $63.56 per barrel on the New York Mercantile Exchange, while Brent crude gained $2.95 to [...]

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Tim Iacono submits:

The Census Bureau reported(.pfd) a jump in housing starts and permits for new construction in June, however, the increase leaves new home construction at levels that are still far, far below that seen during any previous housing downturn in data going back 50 years.
Starts rose 3.6 percent in June to a seasonally adjusted, annualized rate of 582,000 units following a jump of 17.3 percent in May. The June increase was paced by single-family homes, up 14.4 percent for the month. Housing starts are now down 46 percent on a year-over-year basis, 75 percent below the peak in September of 2005.

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The dollar was in a holding pattern versus other majors Friday morning in New York, firming up slightly versus the sterling while seeing virtually no movement against the euro and yen.

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