Housing a Bright Spot — 'Sell the News'?

A construction worker walks on the roof of a new home being built in Phoenix, Arizona.
Joshua Lott | Bloomberg | Getty Images
A construction worker walks on the roof of a new home being built in Phoenix, Arizona.

In a dismal summer for economic stats, housing continues to be the bright spot.

Housing starts increased 6.9 percent from May and are up 23.6 percent from June of last year. Permits declined 3.7 percent from May, but are up 19.3 percent year over year.

Most importantly, single-family starts are up 4.7 percent sequentially, and single family permits were also up, by 0.6 percent.

These numbers are consistent with strong order trends by publicly traded homebuilders, which appear to be capturing a larger portion of the new housing "pie." Beazer, for example, reported June preliminary orders up 28 percent, Meritage up 49 percent.

The bad news: housing starts, at 760,000, are still a fraction of the historic highs in 2006, when starts exceeded two million a year.

The good news: if starts continue to improve at this pace (about 20-25 percent a year), housing will return to more "normal" levels in a little more than two years. By "normal" I mean levels of ten years go, around 1.5 million starts.

Can that happen? It seems like a tall order with GDP at roughly two percent this year. This is why there is a small but growing group who are arguing that this improvement in housing is a "Sell the News" event.

But it may not be over. Builders — the people with their own money on the line — are increasingly optimistic. The NAHB Housing Market Index, out yesterday, is at the highest level since March 2007. This is a good sign, and suggests builders are indeed planning to build more in the near future.

Bookmark CNBC Data Pages:


Want updates whenever a Trader Talk blog is filed? Follow me on Twitter: twitter.com/BobPisani.

Questions? Comments? tradertalk@cnbc.com