Today’s census reported that housing starts came in at 1,669,000, beating estimates and that the previous months had positive upward revisions. Housing permits looked solid in this report, the most since September of 2006. For a few weeks in 2020, the mega housing bears in America hearts were beating fast, hoping for the 2nd great collapse of housing and America. My condolences, a broken heart does heal in time, at least that is what they say on television. Housing starts ended up positive in 2020, even with the global pandemic with single family starts showing 28% year over year growth today. Slow and steady wins the race. The housing market story is about keeping monthly supply low in the new home sales market place, so single-family starts can grow more prominently than we saw from 2008-2019.
From Census: https://www.census.gov/construction/nrc/pdf/newresconst.pdf
Privately-owned housing units authorized by building permits in December were at a seasonally adjusted annual rate of 1,709,000. This is 4.5 percent (±1.4 percent) above the revised November rate of 1,635,000 and is 17.3 percent (±1.8 percent) above the December 2019 rate of 1,457,000. Single-family authorizations in December were at a rate
of 1,226,000; this is 7.8 percent (±0.9 percent) above the revised November figure of 1,137,000. Authorizations of units in buildings with five units or more were at a rate of 437,000 in December. An estimated 1,452,000 housing units were authorized by building permits in 2020. This is 4.8 percent (±0.4 percent) above the 2019 figure of 1,386,000.
Privately-owned housing starts in December were at a seasonally adjusted annual rate of 1,669,000. This is 5.8 percent (±11.0 percent)* above the revised November estimate of 1,578,000 and is 5.2 percent (±10.1 percent)* above the December 2019 rate of 1,587,000. Single-family housing starts in December were at a rate of 1,338,000;
this is 12.0 percent (±13.4 percent)* above the revised November figure of 1,195,000. The December rate for units in buildings with five units or more was 312,000.
An estimated 1,380,300 housing units were started in 2020. This is 7.0 percent (±2.3 percent) above the 2019 figure of 1,290,000.
To say that the mega American housing bears in this country have had the worst year in their lifetime is an understatement. Mother Demographics, low mortgage rates and the United States of America together can be a powerful foe against people who keep hawking about the 2nd housing bubble collapse. On HousingWire this week I addressed this issue in a podcast interview.
If you want more housing construction, it needs to be driven by single-family starts. Multifamily construction has its limits as it was down 39% year over year today and when mortgage rates rise, this sector will be impacted the most. This means that unless we push for deficit financing to try to overbuild homes, it’s all about new home sales.
I wrote about this very subject on HousingWire. People have been screaming about we need more building for over 10 years now, and it doesn’t ever go beyond the normal supply and demand balance in the new home sales market. There is a reason for that. I talked about how to grow supply in 2021 and said I doubt it will ever happen in the manner I discussed.
Since the summer, my big theme with housing has been that housing data will moderate from its recent parabolic move. However, the key is not to overreact to this moderation when it happens; in time, the data will normalize, and we can take it from there. The Builder’s confidence is a good example. Anything above 50 in this index is considered to be expansionary. Still, this data line, like most housing data, is out of whack due to the massive dip from Covid19 and the epic parabolic move higher in the same Calendar year.
From AdvisorPerspectives : https://www.advisorperspectives.com/dshort/updates/2021/01/20/nahb-housing-market-index-drop-in-december-builder-sentiment-still-high
As long as the monthly supply levels stay below 4.3 months, the builders will be delighted; things are ok between 4.4 – 6.4 months. Anything above 6.5 months, the builders will pull back. However, for now, things look excellent from the builder’s side of things. The monthly supply of new homes in the year 2020 finally hit levels that would warrant record-high enthusiasm. I will never be the construction boom guy just because of my fundamental belief that mature economics with a vast older demographic patch have limits. If we commit to deficit financing for construction, then we can get a short term push. With that said, as long as this data line looks this good, we have legs to walk higher with housing starts.
It’s 2021, and time to take a glance at purchase application data. Remember, this looks out 30-90 days, and the last three weeks look like this on a year over year basis.
I am trying my best to teach the housing bubble boys how housing economic data works. If you’re looking for your 30%, 50%, or 70% home price crash, typically purchase application data goes negative year over year for at least 12-18 months. Since last year the data line ended on a near 40-week streak of positive year over year data, you’re asking too much. My best advice is to take 2021 off regarding the bubble crash.
From Calculated Risk:
Context is very key in purchase application data in 2021. I am only looking for 1%-11% growth trends year over year until March 18th. After that, the data will look too strong for about nine weeks due to the Covid19 collapse. After that, the data will look softer year over year until the end of the year due to the parabolic move higher in housing data. I wrote about this recently on HousingWire.
Housing starts in 2020 started the year very strong. So, we will have difficult comps year over year for January and February; remember, context is key. Have a safe and wonderful weekend, my friends.
Logan Mohtashami is a Lead Analyst for Housing Wire, financial writer, and blogger covering the U.S. economy with a specialization in the housing market. Logan Mohtashami, now retired, was a senior loan officer at AMC Lending Group, which has been providing mortgage services for California residents since 1987.