The housing numbers released by the government on Tuesday showed an increase in housing starts, which were up for the third straight month. Single-family starts were up by 4.4%; however, the drop in home building permits cast a pall over the potential good news, since permits fell by 5.6% monthly in September.
According to John Lonski, chief economist for Moody’s Capital Markets, home building permits, as opposed to housing starts, are among the U.S. economy’s 10 leading economic indicators as measured by the Leading Economic Index, which comes out from the Conference Board each month; therefore “. . . the financial markets assign a greater weight to permits rather than starts,” said Lonski, “because they’re seen to be a leading indicator.”
However, he pointed out that “the bad headline news on permits was slightly offset by a 0.5% monthly increase for single-family building permits,” and added that permits were down because of multifamily buildings, which he called “very volatile.”
Lonski said that the single-family increase in August was the first such since March. “In the intervening five months, April through August, one-family permits contracted by a painful 26% overall,” he explained, “picking up the expiration of tax credits at the end of April.” Tuesday’s figures, he added, pointed to “some growth . . . [that] need[s] to continue if housing has any chance of stabilizing.”
Even though Lonski characterized the increase as a “glimmer of hope,” he said that the market was not paying much attention, perhaps for good reason. “Five tenths of a percent after a 26% drop is not so big a deal,” he said. “The market’s attitude is understandable and justified.”
Maybe, however, it’s a sign of good news, he added, that homebuilders applied for more permits in September, indicating some confidence in the future.