2016 Housing Starts Report Card

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Today, the Census Bureau released housing starts data for the month of November.  Starts showed an expected a decline from a hot print in October. Revisions were positive in previous month.

Housing starts in November 2016 were 1.090M (SAAR), 18.7 percent (+/- 6.7%)* below the October 2016 estimate.
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A long standing thesis of mine has been that housing starts were going to grow much slower than what the analyst predicted years ago. Because we are recovering from the lowest levels in starts ever recorded in U.S. history, I did not expect, and we are not experiences, a huge rebound in starts.   This is why:  we are recovering from an over investment  cycle fueled by speculation demand  that was financed with exotic debt that did not allow for a buildup  equity.  Then we moved into a light demographic patch with a massive bolus of 17-29 year olds who were too young to enter  the housing market.  Then, we got rid of the exotic loans that were fueling the boom. With demographics not favorable to home purchasing, current homeowners low on equity and no more exotic debt to fuel speculation purchases, it makes 100% sense to me why builders aren’t building  more homes.  The demand is not there.  I give them credit for not adding more supply to a low demand market.  Currently the monthly supply for new homes like existing homes is higher in 2012-2016 period than any period from 1999-2005. We don’t need more inventory.

I discuss this more in a previously published article:

https://loganmohtashami.com/2016/05/22/demographics-housing-starts/

The grade I give for new home construction in 2016 is a B (83%).  Total growth wasn’t great but single family growth is respectful and the  and the boom in the rate ofgrowth for multifamily  units (i.e. rental housing) has ended.

Single family growth year to date 9.6%
Multifamily growth year to date is -4.6%

From Calculated Risk:
http://www.calculatedriskblog.com/2016/12/housing-starts-decreased-to-1090.html

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Slow and steady growth, is the reality of this housing market Anybody that tells you this is a strong housing cycle needs to keep the numbers in historical perspective. The lukewarm demand has nothing to do with tight lending.

From Doug Short:
https://www.advisorperspectives.com/dshort/updates/2016/12/16/new-residential-housing-starts-in-november-disappoint-expectations

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Logan Mohtashami is a financial writer and blogger covering the U.S. economy with a specialization in the housing marketLogan Mohtashami is a senior loan officer at AMC Lending Group,  which has been providing mortgage services for California residents since 1987. Logan also tracks all economic data  daily on his own facebook page https://www.facebook.com/Logan.Mohtashami