First, I need to say this before going on to the report.
This recent spike in single-family starts can’t be sustained, but it doesn’t need to; all we need is slow and steady growth to keep housing starts going. I wouldn’t put too much weight on the month to month decline.
On to the report!
Not bad at all!
Yes, I know the comps are low to beat on a year over year basis because the tail end of 2018 the housing data got negative, and it took until about May of 2019 to get housing back in line with its slow but steady cycle trend.
On May 23rd of 2019, I took the new home sales market out of the penalty box. The monthly supply came back down to a more acceptable level. We have some easier comps to work with until the 2nd half of 2020. Single-family starts had been trending negative for 2019 as we were working off the excess supply created when rates went higher.
The Best New Home Sales Report Of The Cycle
https://loganmohtashami.com/2019/05/23/best-new-home-sales-report-of-the-cycle/
Remember, they said we can’t find any labor to build starts! Shocking that we can build homes when demand gets better. It’s incredible the miracle of 2019 (Sarcasm)
From Calculated Risk:
https://www.calculatedriskblog.com/2020/02/housing-starts-decreased-to-1567.html
Permit data looks a lot better with the lower mortgage rates. Housing gets soft when the 10-year yield gets to 2.62% and higher. At 1.57% today, we don’t need to worry about that situation yet.
From Fred:
https://fred.stlouisfed.org/series/PERMIT
Housing starts falling into a recession is a recession red flag of mine. This hasn’t happened yet in this record-breaking expansion. I have been able to model out a recession with positive housing starts data, but a lot of other bad things have to happen for that to occur, so it’s not even worth talking about right now.
More on my recession model here:
https://loganmohtashami.com/2020/02/13/recession-red-flag-update-2020/
Today’s housing starts report from the census.
From Census:
https://www.census.gov/construction/nrc/pdf/newresconst.pdf
Building Permits
Privately‐owned housing units authorized by building permits in January were at a seasonally adjusted annual rate of 1,551,000. This is 9.2 percent (±2.1 percent) above the revised December rate of 1,420,000 and is 17.9 percent (±1.3 percent) above the January 2019 rate of 1,316,000. Single‐family authorizations in January were at a rate of 987,000; this is 6.4 percent (±2.5 percent) above the revised December figure of 928,000. Authorizations of units in buildings with five units or more were at a rate of 522,000 in January.
Housing Starts
Privately‐owned housing starts in January were at a seasonally adjusted annual rate of 1,567,000. This is 3.6 percent (±13.3 percent)* below the revised December estimate of 1,626,000, but is 21.4 percent (±12.2 percent) above the January 2019 rate of 1,291,000. Single‐family housing starts in January were at a rate of 1,010,000; this is 5.9 percent (±11.6 percent)* below the revised December figure of 1,073,000. The January rate for units in buildings with five units or more was 547,000.
On another housing data line today, purchase application just had its 4th straight week of double-digit growth year over year, and demand is at cycle highs in 2020. Today the data showed 10% growth, so the last 5 weeks have been good. Just be mindful that we had some negative year over year data previous year with purchase application, so the comps are more comfortable to show better growth in 2020.
+8
+17
+11
+16
+10
From Calculated Risk:
https://www.calculatedriskblog.com/2020/02/mba-mortgage-applications-decreased-in.html
Does that chart above look like an affordability crisis for home buying?
All in all, today was a good day in housing and for the economy. Just always remember, don’t overhype the housing data, slow and steady wins this race, and know the limits if the 10-year yield gets above 2.62%.
From Doug Short:
https://www.advisorperspectives.com/dshort/updates/2020/02/19/new-residential-housing-starts-inch-down-in-january
Logan Mohtashami is a financial writer and blogger covering the U.S. economy with a specialization in the housing market. Logan 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 Facebook page https://www.facebook.com/Logan.Mohtashami and is a contributor for HousingWire.