Update on Home Construction Numbers
Government reports this week reveal that new home construction fell in June to an 8-month low, but there are indications of increased activity coming up. The Commerce Department reported that housing starts fell 5% from May, to a seasonally-adjusted annual rate of 549,000. This is the lowest figure since October, 2009.
Economists had expected a smaller fall to 575,000. The 549,000 figure represents a 5.8% decline from June, 2009.
What do these housing start numbers mean?
Analysts think builders lack the confidence or the financing to ramp up construction. And housing sales and construction are still in a rut—sales even more so, since the government’s home buyer’s tax credit expired.
Any good news in the housing report?
A good sign did appear in the report: building permits posted a gain for the first time since March. May’s permit number rose to a seasonally adjusted annual rate of 586,000 in June, which is a 2.1% increase over May. While down 2.3% for June, 2009 permits, the drop was not as bad as economists expected. They had predicted only 572,000 permits for June.
What do the housing report numbers mean for landlords?
As mortgage rates hit historical lows, along with housing prices in many areas, some people will be able to purchase a home. But unemployment hasn’t eased at all—so the market should stay depressed for the foreseeable future. This means more foreclosures, and possibly more former homeowners who will become renters.
Landlords might also be interested to know that, while multi-family housing starts were down for the third straight month, and down from June 2009, permits issued for multi-family housing were up for the third month in a row—and up from June, 2009. Looks like investors are starting to become active again.
What does Seasonally Adjusted Annual Rate mean?
Glad you asked! Seasonally Adjusted Annual Rate, or SAAR, is a way to remove seasonal variations in data. The number of building permits issued (and ice cream cones sold!) tends to vary greatly depending on the season. So adjusting for seasonality means more accurate comparisons can be made month to month throughout the year.
The SAAR is calculated by dividing the unadjusted annual rate for the month by its seasonality factor. These adjustments are most often used when economic data is released to the public.
Source: Investopedia.com