Housing Starts Moving Along Slowly


Today, the U.S. Census Bureau reported that there were 1,092,000 housing starts. Housing permits came in at  1,168,000. It is a soft report– no way around it, but this is exactly what I predicted and was expecting.

Some of my housing colleges might have given the impression that housing was in “Nirvana” with “Record Breaking” ,”Off the Charts”  demand.  If you listened to them you would expect starts to be booming. However, if you listened to me you would  know that the theme for this economic cycle (2008-2019) has been slow and steady growth for housing  starts and sales.   New home sales are still historically low under any measure, even though we are in a very long economic expansion with mortgage rates below 5% since early 2011 and over 166,000,000 people working.

From Doug Short:


Housing start data tends to have wild movements, month to month. For this reason, I recommend focusing on the overall trends rather than any big moves up or down.  The three month trend shows a slowdown not an acceleration. This is what I have expected for starts. In my article last month on starts,  I go into more details to explain why housing starts are sluggish, (or turtle-ish) as the case may be.

Housing Tortoise Still Moving A Long 


My tortoise (Solomon Grundy)
From Census:  https://www.census.gov/construction/nrc/pdf/newresconst.pdf

Housing Starts:
Privately-owned housing starts in May were at a seasonally adjusted annual rate of 1,092,000. This is 5.5
percent (±11.9 percent)* below the revised April estimate of 1,156,000 and is 2.4 percent (±11.4 percent)*
below the May 2016 rate of 1,119,000. Single-family housing starts in May were at a rate of 794,000; this
is 3.9 percent (±10.4 percent)* below the revised April figure of 826,000. The May rate for units in
buildings with five units or more was 284,000.

Building Permits:
Privately-owned housing units authorized by building permits in May were at a seasonally adjusted annual
rate of 1,168,000. This is 4.9 percent (±0.9 percent) below the revised April rate of 1,228,000 and is 0.8
percent (±1.1 percent)* below the May 2016 rate of 1,178,000. Single-family authorizations in May were at
a rate of 779,000; this is 1.9 percent (±1.0 percent) below the revised April figure of 794,000.
Authorizations of units in buildings with five units or more were at a rate of 358,000 in May.

To put the starts data into context, consider these metrics:

-Single family starts are up 8.5% year over year and 7% year-to-date.  As long as single family starts still grow at it’s slow and steady pace we are fine.

-Multifamily construction starts are down 23% year over year and and down 5.4%  year to date.

This chart from the great Bill McBride at Calculated Risk really shows the gap between single and multifamily construction starts.

From Calculated Risk

StartsShortMay2017 Logan

Big takeaway, housing market looks fine, not to hot and not to cold.

Starts20162017May (1)
Rent inflation is cooling off and looks like it may have peaked  in terms of rate of growth. The marketplace is adjusting to that reality. There are more rentals available and more people are moving from renting to buying homes.  This trend looks normal to me due to the supply push we have seen over the years.  Single family starts will make up a larger percentage of total starts going forward.

From BLS:

LOGAN's Rent inflation

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