NEW YORK (TheStreet) -- The housing starts number released this morning was better -- but still won't get Federal Reserve Chair Janet Yellen to change her cautious tune about housing.
The Commerce Department said builders broke ground on new homes at an annual rate of 1.07 million units, up 13% from a weather-weakened March, beating forecasts for a 984,000-unit clip and easing jitters that had arisen after two straight weaker reports, which had led Yellen to point to the sputtering housing recovery as a risk factor for the economy as a whole.
But don't forget: As 2013 gave way to this year, the low end of 2014 forecasts was around 1.05 million new units, with the average estimate closer to 1.2 million and some forecasts as high as 1.3 million.
So the Fed's first female chair was not Roseanne Roseannadanna, and Janet Yellen will not be saying "never mind."
There are a couple of other reasons to take the report with a modest grain of salt.
First, the gain reported in new building permits, a sign of future starts, was all in the apartment sector, which is notoriously volatile. The Commerce Department said permits for new single-family homes rose only 0.3% over March and fell 3.2% from April of last year.
In some markets, especially in the western U.S, rising prices have resurrected affordability as a big issue constraining demand, though in most of the rest of the nation, the median price of a house is well within the reach of the median household. But new single-family permits are below last year's levels in all four U.S. regions Commerce tracks.
Second, the report says nothing -- by design -- about the sluggish wage growth that is holding back home buying by young people. A new report by the Federal Reserve Bank of New York this week suggests that student loan debt -- now about $30,000 for the average graduate who has loans -- is also delaying demand because potential buyers have to cope with about $300 a month in payments. The share of 30-year olds with mortgages is now below a quarter, down from about a third before the recession.
The verdict is that housing will be really healthy when a report like this points to 1.2 million housing starts. And the key to that is for raises to get bigger as the unemployment rate moves below 6%, likely this summer or fall. As people can budget better, they'll spend more aggressively.
But this report does not show that -- at least not yet. And it's clear that housing will respond to the next leg of the recovery -- whether it's strong or weak -- rather than cause it.