Hopeful about housing starts

Housing starts were up 2.6 percent in April at a seasonally adjusted annual rate of 717,000 compared to March’s revised estimate. This represents a 29.9 percent year-over-year gain from April 2011. A nearly 30 percent increase. What exactly does that tell us—that a year ago at this time housing starts were still basically terrible or that things are really getting better. I suspect that it is a combination of both.

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As long as I have been covering this sector, there has always been an onus on the housing market by just about everyone I run into, whether that person is a shipper, carrier, 3PL, consultant, or whatever.

When I would make inquiries about the state of the freight economy, I would often get a response along the lines of “Well, if housing ever started to come around, it sure would help” or something to that effect.

Now, with most economic indicators, there is always some fluctuation or caution when interpreting the data. And housing starts are certainly no exception. But today’s news regarding April housing starts from the United States Department of Commerce was certainly encouraging.

Here is the data: housing starts were up 2.6 percent in April at a seasonally adjusted annual rate of 717,000 compared to March’s revised estimate. This represents a 29.9 percent year-over-year gain from April 2011.

A nearly 30 percent increase. What exactly does that tell us—that a year ago at this time housing starts were still basically terrible or that things are really getting better. I suspect that it is a combination of both.

Even though this number is encouraging, it stands to reason much more needs to occur, given the high volume of “For Sale” signs in pretty much every neighborhood in every town.

This is made clear in a Reuters report, which pointed out that even with an increase in housing starts, current levels are less than one-third of the January 2006 peak. That is more than six years ago now, and feels like even more than that.

Back to the aforementioned point about housing serving as a driver for improved economic activity, of which the freight economy is included.

As we all know, if housing were to truly recover, it would very good news for a return to economic health. It could serve as a catalyst for major volume increases, in particular, for the trucking market.

The recent improvement in building permits and housing starts may get building going again and therefore, trucking as well, as it has been said that it takes 17 truckloads to build a home, said Ed Leamer, chief economist for the Ceridian-UCLA Pulse of Commerce Index and Director of the UCLA Anderson Forecast. “If we get the saws and hammers going again, we will have a real recovery with much healthier job growth.”

It is hard to argue that 17 truckloads per home is not a pretty compelling statistic, and it is one which makes the monthly housing starts numbers and economic statistic worth keeping a close eye on, too.


About the Author

Jeff Berman, Group News Editor
Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman

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