US: Housing is stronger than what the latest data signals – Wells Fargo

Data released today showed mix signals from the housing sector, with a decline in housing starts and a rebound in permits. Analysts at Wells Fargo point out that while starts have now fallen for three straight months, most of the drop has been in multifamily units, reflecting some slowdown in the apartment market.

Key Quotes: 

“Housing starts fell 4% in July to a 1.191 million-unit pace, which was well below consensus expectations of around 1.256 million units. Our own forecast called for starts to fall to 1.21 million units. All of the drop was in the volatile multifamily category, which saw starts tumble 16.2% in July, following a 16.4% drop the prior month. Single-family starts rose 1.3% this past month, following a 6.3% rise in June.”

“Permits moved in the exact opposite direction. Multifamily permits rose 21.8% to a 498,000-unit pace, which is the highest since April. Permits fell 7.2% in the Northeast but rose in every other region, including huge gains of 35.4% in the South and 24.6% in West—the two largest regions, which account for roughly 70% of the nation’s multifamily permits.”

“July’s weak housing data are difficult to square with the improving trend in the Wells Fargo/NAHB homebuilders’ survey, which rose one point to 66 in August on stronger buyer traffic. We suspect single-family construction will eke out a modest gain for the year, but anyone looking for housing to offset the weakness from slowing growth abroad is likely to be sorely disappointed.”