Housing starts down, but permits provide hope

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The latest round of housing data shows residential construction has fallen again, with December housing starts dropping 4.3% below November to an annualized rate of 529,000 units. Although this decline is somewhat deeper than expected, permit extensions increased strongly by 16.7% month on month in December to an annualized rate of 635,000.

Asha Bangalore, economist of Northern Trust, commented as follows: “Is the sharp increase in housing permits extended in December the beginning of a new trend? It is premature to draw a firm conclusion. However, the December Architectural Billings Index for residential housing sends a bullish signal. The Index rose by 10.7% during December. There is a strong positive correlation between this Index (advanced five months) and housing starts, implying that housing starts could move up in the early months of 2011.”

Source: Northern Trust – Daily Global Commentary, January 19, 2011.

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