Tony Crescenzi
Chief Bond Market Strategist
Miller Tabak + Co

Housing starts increased 9.1% to a 1.066 million annual rate in June, about 100k more than expected. Permits increased 11.6% to a 1.091 million rate. The Commerce Department said that the increases reflected new construction codes in New York City, which resulted in a surge in starts of multifamily dwelling, with builders apparently looking to build homes before more stringent building codes took effect.

As a result of this anomalous factor, starts in the Northeast increased 120k to a 237k annual rate. Adjusted for the anomaly, starts ran at a pace of about 940k in June, a level that if sustained would increase the stock of new homes by about 750k to 800k (because some starts are restarts--teardowns and such).

The rate of increase in the housing stock is below the current level of household formation, which is running at a pace of about 1.2 million per year (Census Bureau data). The divergence will eventually help reduce the supply of vacant homes. This is obviously a crucial condition for stabilization in both home prices and the financial system.

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Tony Crescenzi is the Chief Bond Market Strategist at Miller Tabak + Co., LLC where he advises many of the nation's top institutional investors on issues related to the bond market, the economy and other macro-related issues. Crescenzi makes regular appearances on financial television stations such as CNBC and Bloomberg, and is frequently quoted across the news media. He is also the co-author of the just-revised "The Money Market" and "The Strategic Bond Investor."

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