December 20, 2011

AP’s Kravitz Heralds ‘Beginning of Gradual Comeback’ After One Mediocre Month in Homebuilding

Lord have mercy, these people are looking anywhere and everywhere to turn an economic improvement molehill into something that sort of looks like a mountain.

Today, the headline to Derek Kravitz’s report at the Associated Press (“Rise in home construction suggests a turnaround”) reasonably reflected the underlying reality reported by the Census Bureau, but his first six paragraphs most definitely did not:

The depressed housing market has held the economy back for four years.

No longer.

Home construction has finally begun a gradual comeback and should add to the nation’s economic growth in 2011, a turning point in the recovery from the Great Recession.

The main reason appears to be a positive consequence of the weak economy: Apartments are being built almost twice as fast as two years ago. Renting is the only option for many people who have lost their jobs, their homes or both.

Builders in November broke ground on homes – houses and apartments alike – at an annual rate of 685,000, the government said Tuesday. That was a 9.3 percent jump from October and the fastest pace since April 2010.

The numbers show how far the housing industry has come and still has to go …

Well Derek, let me present all of the numbers, and we’ll let readers decide “how far the housing industry has come and still has to go”:

  • Housing starts, seasonally adjusted annual rate: 685,000. Best since April 2010. Not bad, except for the fact that in the almost 49 years of recordkeeping before 2008, no other month’s reported annualized starts came in below 798,000 — and a typical value during that 49-year period was way, way over 1 million.
  • Housing starts, raw data (i.e., not seasonally adjusted): 51,800, consisting of 32,300 single-family homes and 19,500 units in multi-unit structures. The single-family home number is the lowest value since February 2011, and was slightly lower than November 2010. The multi-unit number is vastly improved, but still less than it was four years ago, and multi-unit dwellings never experienced the bubble that was seen in single-family homes.
  • Building permits, seasonally adjusted annual rate: 681,000, and the best number since March 2010. Wait a minute — Does anyone remember March 2010 being a great month for the economy? Didn’t think so. This month’s permits number is a nice improvement, and it beats things going in the other directions, but building permits aren’t necessarily indicators that building will occur any time soon, and the value was also typically miles over 1,000,000 during the 48 years before 2008.
  • Building permits, not seasonally adjusted: 50,400. About 20%-25% better than November 2008, 2009, and 2010, but far below all other previous Novembers.
  • Housing units under construction, seasonally adjusted: 430,000. That’s back to where it was in January, except for one thing: the single-family component of 237,000 ties October for the lowest value on record.
  • Housing units under construction, not seasonally adjusted: 431,900. The single-family component of 236,900 is 7,000 less than October, and is the lowest on record in any month — not just any November, any single month — in 42 years of related recordkeeping. No value in any other month before November 2009 is below 300,000.
  • Housing units completed, seasonally adjusted annual rate: 542,000. Second-lowest value in 44 years of recordkeeping. Only January of this year was worse.
  • Housing units completed, not seasonally adjusted: 47,200. Lowest since May. Before 2008, no value in any month came in below 70,000, and a typical month during that 40-year period was over 100,000.

A better description of today’s news would be that it’s the teeny, tiny start of a very long climb up a very steep hill. And of course, there’s one key word relating to who’s responsible for the drawn-out nature of the housing downturn which is nowhere to be found in Kravitz’s report: Obama.

Given the change in the housing mix, Kravitz and the AP really ought to consider reformulating the following boilerplate which has appeared for months on end, including today’s item:

Each home built creates an average of three jobs for a year and generates about $90,000 in taxes, according to the National Association of Home Builders.

That’s probably true of single-family homes, but it certainly isn’t true of multi-unit dwellings, nor is the per-unit multi-unit impact on the home-improvement business anywhere near as significant as that of a typical single-family home.

It’s going to be more than a little maddening during the coming year watching the press herald every little improvement in housing as if it’s the harbinger of a great big historic turnaround — which is why yours truly will continue to do monthly dissections of all of the numbers and provide the necessary historical context.

Cross-posted at


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