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Yesterday’s report on residential construction provided more evidence that step one of a housing bottom is underway — and that step two may be beginning.

Total housing starts fell slightly in July because of weakness in multi-family. But starts of single-family homes increased to 490 thousand (at an annual rate), the fifth straight monthly increase and the highest level since last October.

Housing Starts (July 09)

As the chart shows, this rebound is off of extremely low levels, so we shouldn’t get too excited. But it does appear that single-family starts bottomed last January and February (at 357 thousand).

That’s the first step of a housing bottom.

As I’ve noted in previous posts, however, that isn’t enough to declare a bottom in housing activity. Housing activity depends on the number of houses under construction, which depends on both housing starts and housing completions. Completions have exceeded starts for more than three years. As a result, the number of houses under construction has fallen for 41 straight months.

For me, the big news in the July data is that this decline may be ending.

(more…)

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