From 1/1/14 through 7/31/14 new home sales totaled 266,000, down from 268,000 during the same period in 2013. Similarly, single-family starts are up just 3.2% year-to-date and single-family permits are up just 0.8% year-to-date. Single-family activity is, in part, so lackluster because the average new house price hit a new record high of $339,100 last month! At the height of the housing boom in 3/07 the average was just $329,400.
Tag Archives: Housing Starts
Abominable Abodes
Today’s housing numbers stank! Starts for Jan-June 2014 are up 6% compared to 2013, single-family starts up 1%! Multifamily is up 18%. With these numbers a premature rate hike will kill single-family construction. Yes, weather was bad, prices are up, financing is hard, incomes are down, student loans hurt and there’s no labor, but in 2013Q4 and 2014Q1 housing reduced GDP, the first time since mid-2009. Improvement will come slowly!
Struggling Starts
At 350,000 starts/year, multifamily housing activity has largely returned to pre-recession levels. However, at 650,000 starts/year single-family activity remains mired in levels only seen in recessions, despite an economy about to enter the sixth year of a recovery. Were single-family starts to reach one million, the average level since 1959, it would create a million more decent paying jobs and reduce the unemployment rate by seven-tenths-of-one-percent. Home sweet new home!
Housing Hurting
Recent housing data has been weak. It’s because the weather has been harsh, there’s a lack of developable lots and skilled workers, limited inventory, reduced investor buying, higher mortgage rates, fewer low-priced distressed sales and higher house prices. Despite these headwinds, new sales were up 16% and starts were up 18% in 2013. In 2014, expect activity to continue improving like in 2013 but new home prices will be flat.
Interesting Impact
While interest rates are on the rise, so is economic growth. At this stage in the business cycle, growth has the upper hand. While rising interest rates dampen home buying activity, better growth and the concomitant increase in employment more than make up for it. That is why I expect new single-family construction activity to rise by 25% to 775,000 and multifamily activity to rise by 11% to 382,000.
Disappointing Data
Given a widening trade deficit, disappointing retail sales, weak inventory accumulation and now yesterday’s surprisingly bad housing starts at just 836,000 units, I’m reducing my Q2 GDP estimate to just 1%. Interestingly, single-family starts, 2-4 unit starts, and 5+ starts have all lost ground and are each at their lowest level since 8/12. Second half 2013 growth should pick up, leaving full-year 2013 GDP growth at or slightly below 2%.
Happy Housing
Between 1998 and 2002, before the housing market went haywire, total housing starts averaged 1.65 million units and the population of the US averaged 282 million persons. Over the next five years the US population will average about 320 million. As a result, I expect housing starts to steadily rise to a plateau of about 1.725 million units. Absent increasing bank regulations, starts would be expected to exceed 1.825 million.
Hooray for Housing!
After a 15% rise in September, housing starts climbed less than 4% in October, with the entire rise due to a 12% jump in multifamily starts; single-family activity was unchanged. November starts are likely to be flat to marginally down as permit activity is softening as is the overall economy. That said, 2013 should be a great year for housing with at least 20% increases in single-family and multifamily starts.