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A Great Month for Housing

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Housing Starts jumped 12.7% from August to September; producing the second best August-to-September jump since records started being kept in 1945.

Housing Starts jumped 12.7% from August to September; producing the second best August-to-September jump since records started being kept in 1945, (the best year was in 1945 in case you are wondering). The increase is certainly welcome and consistent with our general economic outlook. Unfortunately, for us, it may necessitate an upward revision to our Housing Starts forecast. The increase has the potential for resulting in a year-end-2013 2.9% favorable deviation from the current forecast.   

We will dig into what the very strong September means in terms of a forecast revision (or not), but there are some observations that can be offered today. The quarter-to-quarter increase from June to September, at 4.3%, matches last year’s June-to-September jump. The following quarter last year saw a return to normal levels of activity. 

Another item for consideration is that Housing Starts does not automatically equate to sales of new homes (although we doubt many homes are being built on spec at this time). Now is a good time to make the move into a brand new house; ITR Economics is projecting that the cost of construction materials will go up next year. Housing affordability may become an issue as new home prices move higher, gasoline moves higher, and the FICA tax returns to the normal 7.65% (which will cost the average worker $1,001). It may be difficult for would-be buyers to qualify for homes in 2013, especially in the latter half of the year.

The news was great, but don’t start celebrating a long-lived rejuvenating housing recovery just yet. At the moment, it seems that the growth rate in 2013 may increase from the current estimate of 2.1% to a more favorable 6.3%, but we will let our subscribers know for sure in a few days. Under just about any scenario, the Housing Starts 12/12 rate-of-change begins to move lower in the next few months, which will signal that we are still on track for a more sluggish U.S. economy in the latter half of 2013.

  

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Brian Beaulieu

Brian Beaulieu has been an economist with ITR Economics since 1982 and its CEO since 1987. He is also Chief Economist for Vistage International and TEC, global organizations comprised of over 13,000...

Alan Beaulieu

One of the country’s most informed economists, Alan Beaulieu is a principal of the ITR Economics where he serves as President. ITR predicts future economic trends with 94.7% accuracy rate and...
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