Construction of new homes and apartments fell 5.0% to an annual rate of 571,000 during August after a 2.3% drop in the prior month. Starts of both multi-family (-13.5%) and single-family starts (-1.4%) fell in August. The disappointing news is that the level of housing starts continues to hover at recession lows. The nearly 30% drop of housing starts in the Northeast and a 3.3% drop in the South brought down the headline, while housing starts rose in the Midwest (+2.6%) and West (+2.2%).

Permit extensions rose 3.2% in August, inclusive of a 2.5% increase in permits for single-family homes, which bodes positively for home construction in September. However, the Housing Market Index of the Home Builders Association fell to 14 in September (close to the recession low see Chart 4), which is not indicative of a likely increase in home building activity. The inevitable conclusion from these numbers is that the housing sector is yet to recover.

Asha Bangalore — Senior Vice President and Economist

http://www.northerntrust.com

Asha Bangalore is Vice President and Economist at The Northern Trust Company, Chicago. Prior to joining the bank in 1994, she was Consultant to savings and loan institutions and commercial banks at Financial & Economic Strategies Corporation, Chicago.

The opinions expressed herein are those of the author and do not necessarily represent the views of The Northern Trust Company. The Northern Trust Company does not warrant the accuracy or completeness of information contained herein, such information is subject to change and is not intended to influence your investment decisions.

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