The August data on Building Permits and Housing Starts show a slight increase for both nationwide, but the gains all came from multi-family structures, primarily in the Northeast. Both the total permits and the total starts numbers were in line with consensus expectations.

Looking first at permits, the nationwide total rose to a seasonally adjusted annual rate of 579,000, a 2.7% increase from 564,000 in July, but 32.4% below a year ago. The Northeast was by far the strongest region with a 14.3% monthly increase, but that still left it 24.7% below year ago levels.

The Northeast is, however, the smallest and least important region of the country when it comes to housing (11.1% of all permits). Fortunately the most important region, the South (51.3% of permits) also registered a gain of 7.2%, leaving them 33.1% below last year. The Midwest saw a 5.7% drop in permits on the month and is down 30.3% year over year while the West saw a 5.6% drop on the month and is down 36.0% year over year.

The real interesting story this month was not in the regional breakdown, but in the difference between single-family starts and starts of buildings with five or more units, such as apartment buildings and condos. Single-family starts were actually down 0.2% on the month, but are down just 15.7% on a year-over-year basis.

Apartment permits, on the other hand, surged 18.1% on the month. That, however, is from a very low base; they are still down 64.4% on a year-over-year basis. Keep in mind that it is single-family starts that lead to sales for the major homebuilders like D.R. Horton (DHI) and Beazer (BZH).

The story on housing starts looks similar. Nationwide, total housing starts rose 1.5% on the month to a seasonally adjusted annual rate of 598,000, but are down 29.6% from a year ago. The Northeast was responsible for almost all the gain, with a 23.8% monthly increase. As with permits, however, even with that gain it is still a relatively insignificant part of the total, accounting for just 13.0% of all starts nationwide.

On a year-over-year basis, the Northeast is still the hardest hit, off 41.8%. On the month, the Midwest posted a slight 0.9% increase, and is the region that is in the best shape on a year-over-year basis with a decline of 10.9%. The super-important South region (46.7% of all starts) posted a monthly decline of 2.4%. The West was unchanged on the month and is off 33.2% from a year ago.

Also as with permits, the big story is the difference between single-family and apartment starts. Single-family starts actually fell 3.0% and are down 21.7% from a year ago. Even in the Northeast, single-family starts were actually down 14.5% on the month (5+ unit starts are not given by region, but if the total is up sharply and single family is down one can infer a big increase in 5+ starts, 2-4 family structures are rarely a big factor). Nationwide, apartment starts leaped 35.4% — but even with that gain remain 48.2% below a year ago.

Increasing housing starts are a direct help to GDP growth, and permits are the best indicator of future housing starts. In that respect, an increase in both of these numbers is good news.

On the other hand, existing inventories of new houses are still on the high side, especially relative to the sales level. While there has been some improvement there, we still need to see further reductions in inventory for the market to really be healthy.

It’s not quite as bad as it was earlier this year, when I regarded rising starts and permits numbers to be “simply awful” news. Now it is a more nuanced picture, and this relative month-to-month stability at these levels is probably a good thing.

When you step back and look at the big picture, it is hard to say that the country is suffering from a lack of housing stock. Residential investment is an important component of investment, the I in the GDP equation of Y + C + I + G + (X-M). However, it is generally a barren investment, one that does not produce future income. With the current high and rising vacancy rates for apartments, even multi-family housing is likly to be a barren investment for a while.

We need investment as a share of the economy to rise, but investment in productive areas like better infrastructure and cleaner energy is far more pressing than the need to invest in more houses — or apartments, for that matter.

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