John Williams: Housing Starts Number Complete Hype

Just issued from Williams' ShadowStats alerts:

Annual Housing Starts Contraction Still Worst Since Great Depression. Wall Street hypesters got excited yesterday over a reported 22.2% (25.1% net of revisions) +/- 13.4% (95% confidence interval) monthly jump in February housing starts, another highly volatile and irregular series. The previously reported January monthly decline of 16.8% was revised to a decline of 14.5%.

The February surge was not a signal for a turnaround in the housing market. The Census Bureau report showed all the gain to be in structures with five units or more (apartment buildings, condominiums), and the data were subject to the usual weather, seasonal-factor and reporting distortions. An element of bottom bouncing at a plateau of low-level activity also could be, or soon will be, in play. Importantly, building permits, which tend to lead starts, have not shown any confirming indication of a 79.9% monthly surge in such units, where again, month-to-month volatility often can be attributed to extreme weather, etc.

Volatile series, such as housing starts, generally are best viewed in terms of year-to-year change on a three-month moving-average basis. The three-month moving-average for housing starts as of February 2009 was down by 49.0% from February 2008, the deepest decline ever seen in the two historical housing starts series, going back to post-World War II. Such was versus a revised 47.9% (previously 48.2%) decline in January. For the individual months, February was down by 47.3% year-to-year, versus a revised 55.2% (was 56.2%) annual contraction in January.

So more than a little hype in yesterday's headline number.