Starts: They're Up, After Going Down, After Going Up
Five-plus starts continued their monthly roller coaster ride as the second quarter of 2005 closed out. Housing starts in buildings with five or more apartments rose 16% in June to a seasonally adjusted annual rate of 302,000. This came after a slide in the rate — it fell by 32% in March — followed by a rise — up 36% in April — and another drop of 24% in May. It's important to remember that starts are generated from a survey of about 900 of the approximately 20,000 permit-issuing places in the U.S. Sampling error, along with the inherently lumpy nature of multifamily production (all units in a large building are started at the same time), mean that no one should be too surprised by monthly fluctuations appearing at times without apparent explanation.
Source: U.S. Census Bureau; NAHB Economics Group
Sometimes it's possible to get a better picture of what's going on in a fluctuating series like this one by using a moving average to smooth it out. The three-month moving average for five-plus starts fell within 1,000 units of the actual starts rate in June, suggesting that June's 302,000 is a better indicator of what to expect over the next several months than the numbers reported in April or May. A number in the neighborhood of 300,000 also is where NAHB's forecast expects the five-plus starts rate to settle by the end of the year, after the inevitable month-to-month swings even out.
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