Today's Horrific Housing Report Was All About One US Region

Earlier this morning we saw that housing starts unexpectedly plunged 9.3% to an annualized rate of 893,000.

On the face of it, the report was ugly, considering all the talk about the recent housing snapback.

It's important to note that the miss was entire due to one region: the South.

Housing starts plunged 29.6% in the South, driven by weakness in single family units. "All the hit is in the south, where starts plunged by 29.6%, the biggest ever monthly drop, despite gains in each other region," wrote Ian Shepherdson at Pantheon Macroeconomics.

Starts were actually up in the rest of the country. In the Northeast, housing starts were up 14.1%, driven mostly by multi-family starts. In the Midwest they were up 28%, and in the West they were up 2.6%.

"Taken together, the headline number was very weak, but the report is exceptionally uneven and on balance is not an indication of a significant turn in housing construction."

During her semi-annual monetary policy report this week, Janet Yellen said the housing sector hadn't shown much progress. "While this sector has recovered notably from its earlier trough, housing activity leveled off in the wake of last year's increase in mortgage rates, and readings this year have, overall, continued to be disappointing," she said.

While this report has been disappointing economists do point out that single-family details were actually better than multi-family starts. And Shepherdson argues that this correction was expected after "May starts overshot the pace implied by building permits."

The report is ugly no doubt, but we'd urge caution with interpreting these volatile numbers.