Today we learned that housing starts rose 2.3% in June to a rate of 1.467 million units. But we know by now to ignore such news. In May, starts fell. In April, they increased. May’s estimate was revised down to 1.434 million from 1.474 million, accounting for some of the jump, which is well within the +/-8.3% margin of error and 19.4% below last June levels anyway.
Again here, housing permits tell the real story. Building permits fell 7.5% overall and single-family permits dropped 4.1% to the lowest reading since December 1996. The margin of error is much narrower here (+/- 1.2%) since permits are less affected by the weather.
In the South and West, starts on multi-family units jumped 37% and 20%, contributing to the overall national increase in housing starts. But builders aren’t out of the hole yet— further deterioration in the subprime market has led to higher inventory, which has in turn led to higher foreclosures in many areas. “The jump in inventories makes it almost a sure thing that builders will scale back their construction plans,” said Global Insight economist Patrick Newport, who expects housing starts to turn around (for real) in the first half of 2008.