Housing Starts Soar To 6-Month High In January... Or Do They?

Sometimes, headlines for housing can be misleading and this week gave us a terrific example. On Wednesday, the Commerce Department released its Housing Starts data for January 2010. The data showed starts at a 6-month high. A “Housing Start” is a privately-owned home on which construction has started. Headlines on the Housing Starts story included:

• U.S. Housing Starts Hit 6-Month High (Reuters)
• U.S. Economy Receives Home Building Boost (Shepparton)
• Housing Starts Post Sharp Rebound (ABC)

Based to the headlines, the housing market looks poised for rapid growth through the Spring Market. The real story, though, is that although Housing Starts increased by close to 3 percent last month, the growth is mostly attributed to buildings with 5 or more units. 

This includes apartments and condominiums -- a sector of the housing market that's notoriously volatile. If we isolate Housing Starts for single-family homes only, we see that starts grew by just 7,000 units last month and have failed to break a range since June 2009.  January's tally is slightly below the 8-month average.

Perhaps more interesting than the Housing Starts, though, is the Commerce Department's accompanying data for Housing Permits.

After a 5-month plateau that ended in November, Housing Permits posted multi-year highs for the second straight month. According to the Census Bureau, 82% of homes start construction within 60 days of permit-issuance.

One reason permits are up is that home builders want to capitalize on the federal homebuyer tax credit's dwindling time frame.  Sales are expected to spike in March and April and more homes will come online to deal with that demand. 

Home buyers in Indianapolis should shop carefully, but with an eye on the clock. As the tax credit's April 30, 2010 deadline approaches, competition for homes may be fierce.