July 17, 2014

AP Quickly Buries Bad Housing News, While Reporter Crutsinger Blames It All on ‘the South’

Late this afternoon, I went to the Top Business Headlines page at the Associated Press’s national web site to get today’s new home construction news. Because the AP didn’t have a story there (saved here for future reference), I knew it had to be bad, especially because to ignore it, the wire service made room in its Top 10 stories for an item on Toyota experimenting with fuel cells and aircraft orders at an air show in England.

The Census Bureau reported that seasonally adjusted housing starts fell by 9.3 percent in June after declining 7.3 percent in May. Seasonally adjusted applications for new building permits declined by 4.2 percent after a 5.1 percent revised May drop. Reporter Martin Crutsinger, doing his utmost to earn the “Worst Economics Writer” tag the National Review’s Kevin Williamson conferred on him last year, blamed the weather, blamed “the South” without telling readers how the Census Bureau defines it, and ignored how, even after a very bad month, that region is still outperforming other regions in new homebuilding. Excerpts follow the jump (bolds and numbered tags are mine):


U.S. home construction fell in June to the slowest pace in nine months, [1] a setback to hopes that housing is regaining momentum and will boost economic growth this year.

Construction fell 9.3 percent last month to a seasonally adjusted annual rate of 893,000 homes, the Commerce Department said Thursday. That was the slowest pace since last September and followed a 7.3 percent drop in May, a decline even worse than initially reported.

Applications for building permits, considered a good indicator of future activity, were also down in June, dropping 4.2 percent to a rate of 963,000 after a 5.1 percent decline in May.

The worse-than-expected June performance reflected a big drop in activity in the South, where construction plunged by 29.6 percent last month. [1]

Analysts, however, said that the June decline in construction may have been influenced by temporary factors such as heavy rain in parts of the South which could have held back housing starts in that region. [2]

Jennifer Lee, senior economist at BMO, said it was too soon to conclude that the housing recovery has stalled. “After all, job growth continues, mortgage rates are near their lows for 2014 and homebuilder confidence has been increasing,” she said in a research note. [3]

All of the June weakness was confined to the South, where about 40 percent of home construction occurs. [4] Construction was up 14.1 percent in the Northeast, 28.1 percent in the Midwest and 2.6 percent in the West.

Home construction has struggled to gain traction this year, limiting its ability to contribute to economic growth. Part of the weakness reflected an unusually severe winter which hampered construction. But rising home prices, a rise in mortgage rates from historically low levels and tighter lending standards imposed since the financial crisis have also been a barrier, especially for potential first-time buyers. [5]

Economists expect there is a lot of pent-up demand for homes [6] after many potential buyers put off purchases during the 2007-2009 recession and the weak recovery since that time. Job growth has accelerated in recent months, with an increase of 288,000 jobs in June. That has helped to push down the unemployment rate to a nearly six-year low of 6.1 percent in June.


[1] — As yours truly has pointed out many times before, the AP consistently and incorrectly equates “housing starts” with “housing construction.” They’re not in any way, shape, or form the same thing. Housing starts only tells us what went into the figurative pipeline; it tells us nothing about how much activity took place inside the pipes, or what came out of the pipes at the other end. Crutsinger’s statement that construction “activity” in the South dropped by almost 30 percent is ludicrous. If that had really happened, thousands of construction workers in that region would have been laid off. Conversely, employment would have picked up hugely in the Midwest. Of course, neither extreme event happened.

[2] — Seriously? They’re still playing the weather card in June because of rain? Words fail.

[3] — “Job growth continues,” but the jobs aren’t paying well enough to support the idea of buying a house. As Zero Hedge reminded readers yesterday, builder confidence increased back in September, but the substantive improvement builders were hoping for didn’t happen.

[4] — When the Census Bureau refers to “the South,” it’s referring to a region which includes the following governmental entities not normally considered to be in that region: Delaware, Maryland, DC, West Virginia, and Oklahoma. It’s far more than old Dixie. Perhaps identifying the region isn’t as important from month to month, but during a month when the region showed such a huge decline which is being explained away with weather-related excuses, it should be. But if that happened, the tired weather excuse would become less plausible.

Crutsinger is way off on his claim that “the South,” now that it has been defined, is “where about 40 percent of home construction occurs.” At the front end and back end, the South has had well over 50 percent of the nation’s starts and final sales for years. By region, here’s what the past six months looks like for starts, followed by new-home sales results for all of 2013:



The Census-defined South has been more than pulling its homebuilding weight for years. Without it, the housing industry would barely have a pulse. Even its fallback levels for starts and permits are a higher percentage of the nation’s total than its population.

Also note in the highlighted areas above how the other three Census Bureau regions had awful Mays.

[5] — Again, here’s the weather excuse. As to lending standards, just about anyone who has tried to buy or refinance a home since Dodd-Frank became law will tell you that the dificulties in getting transactions done isn’t as much about “tighter lending standards imposed since the financial crisis” as it is about silly intrusive questions asked by paranoid underwriters who are afraid government auditors are going to second-guess them if they don’t scrutinize everyone to within an inch of their lives.

[6] — The theory that there is a lot of “pent-up demand” is shaky at best. Between lower incomes and sky-high student loan balances, the pool of qualified buyers may be nowhere near as large as mortgage lenders hope.

This morning, Business Insider’s “Economists estimate(d) (that) starts increased by 2.4% in June with building permits jumping 3.1%” before the Census Bureau’s release. Of course, Bloomberg News reported after the news came out that these declines “unexpectedly” occurred. Same-old, same-old.

Cross-posted at NewsBusters.org.



  1. I went and looked at the Census data. It appears that the houses under construction in the South has increase by approx. 10% this year. Maybe they aren’t starting as many new projects until they finish some?

    South (all not seasonally adjusted)
    June 2014 Jan 2014
    Complete 34.6 29.2
    In Prog. 346.5 312.1
    Starts 35.3 34.1
    Permits 42.0 37.9

    In short, I wouldn’t worry about the construction industry in the South, they are likely hiring.

    Comment by Scott — July 18, 2014 @ 1:30 pm

  2. Good points.

    Comment by Tom — July 18, 2014 @ 1:37 pm

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