I’m not sure why the market gets excited whenever there’s a seemingly “bullish” housing starts number released. For sure, in a truly healthy housing market a strong starts number reflects a positive builder outlook and healthy demand.
The details of Friday’s housing starts data showed that single-family home starts were flat from March to April. This is consistent with the plunge in the builder confidence metric released earlier last week.
The big “jump” in starts was for multi-family rental buildings. The problem with this is that, as is now evident all around Denver, there will soon be a glut of rental units on the market – both single family homes and apartments. We know big investment funds have stopped buying homes to rent out and this is why existing home sales are plummeting. But I’ve also noticed that several new big buildings that have come on-stream in Denver and the surrounding metro area are now offering move-in incentives, indicative that supply is beginning to out-strip new demand.
I published an article for Seeking Alpha which goes over the housing starts data in detail. You can read it here if you are interested in the facts: The Housing Starts Data Is Bearish.
I have a feeling my interpretation of the data is likely accurate because the homebuilder stocks initially spiked higher on the headline reports but sold off to close flat on the day, despite a .5% move higher by the S&P 500.