New Residential Construction Declines -1.1% in July 2012

The July 2012 Residential construction report showed Housing starts decreased, -1.1%, from June's revised 754,000, to a level of 746,000. In June, housing starts increased by a revised +6.8%. Housing starts have increased +21.5% from a year ago, outside the ±14.2% margin of error. For the month, single family housing starts decreased -6.5%. Apartments, 5 units or more of one building structure, increased +9.6%, but don't get too excited, this monthly percentage change has a whopping ±31.3% error margin. Home construction statistics have massive error margins, so don't bet the farm on the monthly percentage changes.


housing starts


Housing starts are defined as when construction has broke ground, or started the excavation. One can see how badly the bubble burst on residential real estate in the below housing start graph going back all the way to 1960.


housing starts yearly change


New Residential Construction housing starts has a margin of error way above the monthly percentage increases. This month has a error margin of ±9.6% percentage points on housing starts. That's why one should not get too excited on the monthly percentage change.


housing starts monthly percentage change


Single family housing is 75% of all residential housing starts. Below is the yearly graph of single family housing starts going back to 1960.


housing starts yearly change single family


Housing of 5 or more units, or apartments, has increased 30.1% from a year ago, but here again, the margin of error is ±49.7%. That's almost a flip of the coin in terms of accuracy.


housing starts 5 or more units


Building permits increased +6.8% to 812,000 and are up 29.5% from this time last year. The monthly change for building permits has a ±1.5% margin of error. In other words, building permits are much more accurate. Single family building permits increased +4.5% from last month. The below graph shows building permits are not always a smooth line from month to month. Building permits are local jurisdictions giving approval, or authority to build.



Housing Completions increased +7.1% and are now up +5.4%, from a year ago. Housing completions also have a large error margin, with a monthly error range of ±15.9%. Housing completions mean either people have moved in or the carpet is laid down. In other words the house is done, including the flooring.


housing completions


Single family housing completions lag housing starts by about 6 months, multi-family about twice that. Below are single family housing starts, three month average change from a year ago, plotted against single family housing completions, quarterly average level change from a year ago. We can see some pattern of the lag between the two.


single family housing starts level chg, quarterly against 1 yr. ago completions


We'd also claim those who think housing is going to increase 50%, 100% for the rest of this year, aren't looking at the below, the quarterly percentage change, from a year ago in housing starts versus housing completions, single family. It looks more on track to see an overall increase of 5-20% new single family homes constructed for 2012, which seems optimistic here in middle class muddle land.


single family housing starts vs. completions, % chg., 1 yr. ago


This report has a large variance, so to establish a trend line one must take into account really a year of data. This report is also seasonally adjusted and residential real estate is highly seasonal. The statistics are also annualized, which gives what the levels would be if one month's rates were the same for the entire year.

Below is the graph of single family housing starts on a monthly basis.


housing starts single family


There seems to be a vested interest in a housing recovery, real or not. We can see housing completions are on track to be still at record lows for 2012. Some compare housing to the auto industry, but not so. While one might be able to buy a car on low wages, buying a house is a whole other story. While it's reasonable to say the residential housing market has hit bottom, some of the recovery projections are in fantasy land.

Here is last month's overview, only graphs revised.

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