July 18, 2018

June 2018 Residential Construction: Weak News, With a Possibly Positive Explanation

Filed under: Economy,Taxes & Government — Tom @ 11:38 am

From the Census Bureau (eventual permanent link) — It’s only one month, but it’s a real clunker:

Privately-owned housing units authorized by building permits in June were at a seasonally adjusted annual rate of 1,273,000. This is 2.2 percent (±1.2 percent) below the revised May rate of 1,301,000 and is 3.0 percent (±1.1 percent) below the June 2017 rate of 1,312,000. Single-family authorizations in June were at a rate of 850,000; this is 0.8 percent (±1.5 percent)* above the revised May figure of 843,000. Authorizations of units in buildings with five units or more were at a rate of 387,000 in June.

Privately-owned housing starts in June were at a seasonally adjusted annual rate of 1,173,000. This is 12.3 percent (±8.3 percent) below the revised May estimate of 1,337,000 and is 4.2 percent (±10.2 percent)* below the June 2017 rate of 1,225,000. Single-family housing starts in June were at a rate of 858,000; this is 9.1 percent (±8.8 percent) below the revised May figure of 944,000. The June rate for units in buildings with five units or more was 304,000.

The silver lining is that permits for single-family units held their own. Single-family starts did not. (The seasonally adjusted results are consisted with the underlying raw numbers.)

Sticking with seasonally adjusted single-family results, the home-construction metrics for the five months of this year were pretty strong. If there’s a quirk in June’s comedown, it may be that builders may have been in an unusual rush to complete already-started units in time for the summer selling season and weren’t that inclined to start new ones.

But why would this year be any different than previous years in that regard?

If there’s a scenario where the selling-season rush theory makes sense, it would be that this year’s improving economy, the prospect of higher interest rates, and perhaps the tax cuts combined to cause a boomlet in single-family construction starts in this year’s earlier months (up 9 percent over the first five months of 2017, and 17 percent greater than the first five months of 2016).

But June’s completions, while respectable, especially compared to starts, weren’t huge.

So it’s too early to tell if June was a one-off or the beginning of a troubling trend.

Also lurking in the background is the reality that many first-time homebuyers are burdened with extraordinary levels of student-loan debt and can’t qualify for mortgage financing.

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2 Comments

  1. Given California’s lagging economy, one wonders if they are dragging down the stats here as well? I suppose it would be difficult to do stats sans California. Maybe by itself as compared to the country as a whole?

    Given CA’s really expensive housing pricing normal people out it wouldn’t surprise me that all of the lag is due to them.

    Comment by dscott — July 21, 2018 @ 7:46 am

  2. Well, Ohio publishes monthly stats on home sales, so it might be possible to carve that out if CA’s realtors publish the same thing.

    I think California’s slump, if it’s for real and if it continues (which I think it is, and it will), will be the most deliberately unreported/under-reported economic story before the election. The GOP gov nominee needs to do all he can to highlight it.

    Comment by Tom — July 22, 2018 @ 7:42 pm

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