Housing Starts – When Up is Down

Yeah, you heard that right.   Compared to February of 2009, housing starts were up.   Compared to January of 2010, housing starts were down.   Compared to what the market expected, housing starts were “less down.”

You’re going to hear a lot of it blamed on bad weather.   I’m not so sure I buy that as being that big of an impact.    I think those who want to build will build either way.  What do you think?

U.S. Housing Starts, Permits Fall in February

U.S. housing starts and permits to build new homes both fell in February as winter storms in some parts of the country disrupted home building, a government report showed on Tuesday.

The Commerce Department said housing starts fell 5.9 percent to a seasonally adjusted annual rate of 575,000 units, reversing the prior month’s gain. Compared to February last year, starts were up 0.2 percent.

 

Housing Starts – October 2009

Thanks to Calculated Risk for the graph.  

The last time housing starts were this low was, oh wait, they are actually lower now than they were in 1982.
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Housing Starts Drop….

Housing Starts came in sharply lower for October.    Much below what the market had expected and actually down, not just less bad than before.    A couple of thoughts about the report:

• Seasonally, this is a normal thing.   Very few builders want to start homes in October (at least not in the northern half of the United States where it might snow) because that makes building not nearly as fun.
• The Housing tax credit is not a huge impact on new construction because of the time frames it takes to build a house.   If you start designing a house today, you’ll have a hard time getting the house built and the certificate of occupancy by the time the tax cut is done.
• The percentages vary from one geographic region to another, but this is predominantly a first time home buyer driven market.    That is not the typical market of people who are buying new construction.

So, it’s another sign that the housing market isn’t as healthy as we’d like.

Tom Vanderwell

Housing Starts Show Sharp Drop; CNBC.com

New U.S. housing starts in October unexpectedly fell to their lowest level in six months, weighed down by a sharp decline in construction activity for both single-family and multi-family dwellings, a government report showed on Wednesday.

The Commerce Department said housing starts dropped 10.6 percent to a seasonally adjusted annual rate of 529,000 units, the lowest level since April and the percentage drop was the biggest since January. Analysts polled by Reuters had expected housing starts to rise to 600,000 units. September’s housing starts were revised upwards to 592,000 units from the previously reported 590,000 units.

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I love it! Two of my top 10 financial writers disagree!

This makes me smile.   Bill at Calculated Risk and Barry Ritholtz  are two of the financial writers who I follow quite closely and who I’ve learned a lot from over the past few years.   So, I have to chuckle when I read that the two of them don’t agree about what the housing starts information means.

Let me lay it out:

Barry says:

• Anyone who says we’re at a bottom in real estate is nuts.  (Okay I’m paraphrasing but he is rather blunt)
• There’s not a chance we’re going to “flashback” to a healthy market any time soon.

Bill says:
Well, just read below what Bill says, and then tell me.    What do you think?

(Hint – I’m with Bill on this one.)

Calculated Risk: Ritholtz: “Why are people calling a bottom for Real Estate?”

A few quick points:

# If single family housing starts bottomed in January, on a seasonally adjusted annual rate (SAAR) basis, the 12 month moving average of unadjusted data won’t bottom until October or so (depending on the shape of the recovery). Using this method adds a lag to the analysis.

# Barry also conflates calling a bottom in housing starts with: 1) “a bottom in Real Estate” and 2) “a snap back”.

First, there will probably be two bottoms for Residential Real Estate. The first will be for new home sales, housing starts and residential investment. The second bottom will be for prices. For more on this, see: More on Housing Bottoms

Most people think prices when they hear the word “bottom”, and the bottom for prices usually trails the bottom for housing starts – sometimes the two bottoms can happen years apart!

Second, looking for a bottom in housing starts doesn’t imply “a snap back” in activity. As I noted yesterday, “I expect starts to remain at fairly low levels for some time as the excess inventory is worked off.”

Barry Ritholtz, Calculated Risk, Housing Starts, Housing Bottom

Housing Starts….

Housing Starts came in better for June than expected and the largest percentage jump (not units, percentage) since 2004.   There have been many people who have said that a bottom in new housing will come before a bottom in existing homes.   It’s too early to tell where this trend is going.

The bond market frankly doesn’t like the fact that housing starts are up.   Why?  Because most markets are dealing with significant inventory issues.   When we have too much inventory, adding more accentuates the problem.

If anyone has statistics on how many of the new homes are custom vs. “spec” I’d love to hear them.

Tom Vanderwell

P.S. Mortgage Market Update will be coming shortly.

Housing Starts, Building Permits Show Surprise Increase – Economy * US * News * Story – CNBC.com

New U.S. housing starts and permits jumped in June, propelled by a rise in ground-breaking for single-family homes and suggesting the battered housing sector was beginning to stabilize, a government report showed on Friday.

Housing starts climbed 3.6 percent to a seasonally adjusted annual rate of 582,000 units, from May’s upwardly revised 562,000 units, the Commerce Department said. Single-family home starts jumped 14.4 percent, the biggest rise since December 2004. Both overall starts and single-family starts have risen for two straight months.

Housing Starts

Housing Starts for May, 2009

Here’s a quick overview of the housing report:

• Up for the month of May compared to April.
• WAY down compared to May of 2008. 

Calculated Risk has more details (see below) but until we work through inventory issues that are plaguing more markets in the US, we aren’t going to see a signficant recovery in home building.

Check out the chart that Calculated Risk did as well.

Tom Vanderwell


Calculated Risk: Housing Starts May

Building Permits:
Privately-owned housing units authorized by building permits in May were at a seasonally adjusted annual rate of 518,000. This is 4.0 percent (±1.7%) above the revised April rate of 498,000, but is 47.0 percent (±2.1%) below the May 2008estimate of 978,000.

Single-family authorizations in May were at a rate of 408,000; this is 7.9 percent (±1.5%) above the revised April figure of 378,000.

Housing Starts:
Privately-owned housing starts in May were at a seasonally adjusted annual rate of 532,000. This is 17.2 percent (±14.4%) above the revised April estimate of 454,000, but is 45.2 percent (±5.8%) below the May 2008 rate of 971,000.

Single-family housing starts in May were at a rate of 401,000; this is 7.5 percent (±14.2%)* above the revised April figure of 373,000.

Housing Starts

Housing Starts

I didn’t cover this Tuesday because I was out most of the day, but housing starts came in down.   Did they come in “down” far enough to show signs of a bottom in the new housing market?   I don’t think so…..

Tom Vanderwell

P.S. Thanks again to Bill at Calculated Risk for the chart!

Housing Starts

Housing Starts for 50 years. Wow

Housing Starts

Silver Lining in Home Construction?

As the details in the article below show, the numbers in March for housing starts and permits were ugly.   Much worse than expected by the economists and analysts that are “out there.”

A couple of thoughts about that:

• I don’t think anyone would disagree that virtually the entire nation has an inventory problem.   There are way more houses out there than we have people who are ready willing and able (with today’s guidelines) to own them.   So, the fact that we’re not adding more homes to the inventory is a good thing, in the long run.
• I was talking to a local developer on Tuesday and while we were discussing many thing, one of the items of discussion was the whole inventory challenge.   We both agreed that until the inventory of foreclosed homes shrinks, the discrepancy between what someone can buy an existing home for and what it costs to build a new one is going to be, in many (most) areas of the country, cost prohibitive.   I’ve got a friend who is working on some projects in Texas where that isn’t true, but for most, it is.
• The biggest challenge that home builders are going to face for the next period of time (how long depends on where they do business) is whether they can outlast the inventory problems.  Those who can outlast the inventory issues will find themselves positioned well for the future.  

So, is there a silver lining?  Yes there is.  But it’s quite a dark storm cloud for builders until they get to the silver lining…..

Tom

Housing Construction Fell Again in March – NYTimes.com

The government said Thursday that housing construction plunged to the second-lowest level on record in March, providing a sobering sign that the worst housing slump in decades has not yet ended.

Construction of new homes and apartments dropped 10.8 percent last month to a seasonally adjusted annual rate of 510,000 units, the Commerce Department reported. That was the second lowest construction pace on records that go back 50 years.

Housing Starts

Housing Starts

Once again, thanks to Bill at Calculated Risk for the great charts!

A couple of thoughts on this chart:
1. Yes, starts were up.   But single family starts were basically flat.
2. One month is good news but it doesn’t make a trend.
3. Take a careful look at the chart – the total starts went up but one unit starts didn’t.

I’ll have my morning market update in about an hour.

Tom Vanderwell

Housing Starts

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