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| Single Family Production Continues to Move Sideways |
| Written by Jonathan Smoke | |
| 07.17.2008 | |
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Discuss this article on the forums. (0 posts) The Commerce Department released the initial readings on new home construction in June today. The headlines are generally focusing on the stat that “single family construction fell 5.3% in June.” Don’t be fooled by the quick simple read of this data. The data for June only showed that we’re moving sideways at very depressed production levels. The Commerce department release reported that total residential permits in June were at a seasonally adjusted annual rate of 1,091,000, which is 11.6 % above the revised May rate of 978,000, but is 23.9% below the revised June 2007 level of 1,433,000 permits. The nearly 12% increase in total permits was statistically significant. Multi-unit permits drove the increase in total permits. Single unit permits in June were at an annualized rate of 613,000 units, which was 3.5% below the upwardly revised May level of 635,000. The decline was also statistically significant, but it should be noted that the May number was increased 2% over what was originally reported in June. The headline-grabbing statistic was less reliable. Single unit housing starts in June were at a seasonally adjusted annual rate of 1,066,000, which was 9.1 percent above the revised May estimate of 977,000 units. The 9.1% increase reported was not statistically significant because of the margin of error in the way the survey data are collected. In other words, we are not highly confident that it was not down. Likewise, single unit starts in June were at an annualized rate of 647,000 units, which is 5.3 percent below the May figure of 683,000 units. That number is also not statistically significant. It could have been up. In fact the May figure was revised up 1% from its original number. Hence, what we learned today is that we are moving sideways in the level of single family production. The level of production is significantly depressed against levels of last year and against the peak activity in prior years. And, all things considered, this is a good thing as production needs to follow demand so as to not worsen the inventory overhang we currently have. 
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