Housing Starts Rise to Highest Level Since Lehman Collapse
New residential construction for June signaled continued signs of recovery. There were 760,000 new housing starts during the month, which was better than economists' estimates of 745,000. However, building permits missed estimates as the headline reading came in at 755,000 versus the 765,000 consensus.
Building permits track the changes in government issued new building permits from the prior month. Housing starts track the changes in the number of new residential buildings that began construction during the month. Both signal the health of the US housing market.
Larger-than-expected increases in housing starts and building permits suggest increased household income and in turn an economic expansion, and vice-versa.
According to the US Department of Housing and Urban Development, housing units authorized by building permits in June were at a seasonally adjusted annual rate of 755,000. This is 3.7 percent below the revised May rate of 784,000, but is 19.3 percent above the June 2011 estimate of 633,000.
Single-family authorizations in June were at a rate of 493,000, 0.6 percent above the revised May figure of 490,000. Authorizations of units in buildings with five units or more were at a rate of 241,000 in June.
Privately-owned housing starts in June were at a seasonally adjusted annual rate of 760,000. This is 6.9 percent above the revised May estimate of 711,000 and is 23.6 percent above the June 2011 rate of 615,000.
Single-family housing starts in June were at a rate of 539,000, 4.7 percent above the revised May figure of 515,000. The June rate for units in buildings with five units or more was 213,000.
Traders who believe housing starts and building permits are a leading indicator for the economy and US housing market, you might want to consider the following trades:
- Long building companies like PulteGroup (NYSE: PHM) because the more new housing starts, the more demand these building companies will have in the future.
- Long companies like Louisiana-Pacific (NYSE: LPX), who manufacture and distribute products and materials for home construction.
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