Those expecting a strong Spring start to housing (and you know who you are), were miles off their forecast.
Both starts and permits were down steep percentages, both below the bottom ranges of economists’ estimates.
The Bloomberg Econoday consensus estimate for housing starts was 1.167 million homes SAAR (seasonally adjusted annualized) in a range of 1.120 million to 1.195 million.
Starts came in at 1.089 million.
The Bloomberg Econoday consensus estimate for housing permits was 1.200 million SAAR (seasonally adjusted annualized) in a range of 1.175 million to 1.231 million.
Permits came in at 1.086 million.
Highlights
Data on the housing sector are slowing going into the key spring season. Housing starts fell a very sharp 8.8 percent in March to a 1.089 million annualized rate which is well below Econoday’s consensus for 1.167 million and below the low estimate for 1.120 million. Permits are showing similar weakness, down 7.7 percent at a 1.086 million rate which is likewise below both the consensus and low estimate.
Weakness in starts is split roughly evenly between single-family and multi-family components with weakness in permits concentrated in multi-families. Nevertheless, there is fundamental strength in the year-on-year rates, at plus 14.2 percent for starts and a less spectacular plus 4.6 percent for permits.
Recent History
Housing starts & permits have swung sharply in recent reports including a big upswing for starts in February together with a big downswing for permits. Forecasters are calling for a reversal in March, a 0.9 percent dip for starts to a 1.167 million annualized pace and a 2.8 percent gain for permits to a 1.200 million rate. A gain for permits, especially one centered in single-family homes, could lift the outlook for what has been an underperforming housing sector.
Fundamental Strength
Inquiring minds may be interested in exploring Bloomberg’s comment “Nevertheless, there is fundamental strength in the year-on-year rates, at plus 14.2 percent for starts and a less spectacular plus 4.6 percent for permits.”
I happen to have a series of pictures that adequately displays the “fundamental strength” that Bloomberg cites.
Housing Starts 2004-2016
The fundamental strength of March 2016 vs. March 2015 is based on a lowball number last year that was then downplayed as “the weather”.
Today, beating the previous year’s bad weather represents fundamental strength.
Based off that rationale, let’s look ahead to see what is fundamentally on the horizon.
April’s Housing Starts “Fundamental” Number to Beat
Housing Permits 2004-2016
June’s Housing Permits “Fundamental” Number to Beat
Fundamentally Speaking
In April, I foresee “fundamental weakness” in housing starts and in May and especially June, I foresee massive “fundamental weakness” in permits based on Bloomberg’s methodology that today sees “fundamental strength”.
Mike “Mish” Shedlock
Another spot on post Mish!
Correct!
Mish is the only living economist I’ve been exposed to who tells the truth.
That is as opposed to the Uni-Party’s bought and paid for “economists.”
(They know who they are!)
I’m one of those of the mind that residential construction will be a strength this year. The GDPNow guys downgraded their growth for this segment from 9% to 8.5% on the report. So down slightly, but still pretty solid, not too many other segments growing like that.
Sure, why not?
I mean FHFA director Mel Watt has been lowering the credit standards (down payment as low as 3%) for borrowers wanting GSE loans.
Eh, what could go wrong??
Sounds like a deja vu, again!
Deja Vu?
Haven’t we been there before….oh with say QE1, QE2, QE3, etc. etc. etc. ad nauseam….
Big builders in the SF Bay Area are putting up these three story attached and detached homes with two to three feet from exterior wall to wall. These places start in the high $700,000 and up. Who in the right mind would want these? By the time Bloomberg reports any issues the housing bubble will have already popped.
Vacancies abound after illegals are deported and their ill gotten possessions confiscated.
Sorry no deportations here in California……..
The key take away from the report is that multi-family is slowing, and single family growth is ongoing year-over-year.
http://www.calculatedriskblog.com/2016/04/comments-on-march-housing-starts.html
1960s to early 1970s levels of activity with an extra 100,000,000 people in the country is the new improved strong economy. Or said another way, still down 50% from the highs of 10 years ago.
The housing sector has developed a major cold because it is now embroiled in the larger frauds that permeate Wall Street. When virtually every asset under the sun has been manipulated to provide a “wealth effect”, this was bound to happen. Much of the “recovery” itself was a giant fraud, a wealth transfer mechanism which served to protect the banks and their executives from their own criminal activity.
The problem for home builders is that in order to see an increase in sales, they need to build more affordable homes. I don’t see that happening in any meaningful way because land prices are still inflated. We are seeing this play out in Houston in real time. We are awash in luxury homes, but there are now fewer people who can afford them. Many who could afford them are leery (if they are smart at least) of overpaying for a house that may decline in value. The canard of “low inventory” is just that, a work of fiction that really only applies to cheap starter homes which builders can’t really afford to bring to market if they want to turn a profit.
The house humpers continue to hope for a breakout in housing, but that’s not going to happen (not in any sustainable fashion) unless we find a way to restore wage growth and rejuvenate the middle class.
http://aaronlayman.com/2016/04/census-housing-starts-permits-decline-march/
The data from roughly 2003 – 2012 is heavily influenced by the massive real estate bust and is not a comparable for anything. C’mon Mish! Your over selling your thesis!
Which part is not comparable? The 2001 – 2006 bubble, or the 2006 – 2010 crash, or the 2011 – 2015 recovery?
Boom and bust
It’s the news buyers have been waiting for: San Francisco’s crazy competitive market appears to be slowing down. According to SocketSite, the inventory of unsold homes on the market in mid-April is at its highest point in four years.
“The inventory of unsold homes listed for sale in San Francisco ticked up to 615 over the past week and is now running 40 percent higher versus the same time last year, the greatest year-over-year increase we’ve recorded since 2010 and the highest mid-April inventory level since 2012,” said the post.
http://blog.sfgate.com/ontheblock/2016/04/19/more-sf-homes-sit-unsold-as-inventory-grows/
There is a large time delay between the deciding to build and when the built inventory hits the market.
What is needed today is affordable housing that qualifies for the new ‘benefits’ from the zero down and low interest programs from Fannie and Freddie.
However what is being built is multi-unit properties that can be rented.
This problem of inventory not matching demand is systematic in housing and varies from location to location due to the large time delays between getting the land and permits and finishing the product.
The ‘high end’ is suffering now and the lower end will suffer in the future.
Just get use to it, it is the nature of housing and housing will fail to rescue our endemic low growth.
Fewer starts should result in stable to higher home prices and rents in tight markets.
That said, when the Fed stated it was going to concentrate on goosing stocks and real estate several years back, it wasn’t joking. Do we believe it is kidding us when it has said that it’s target is now wages and main street?
Fight ’em if you like, but don’t complain when when the house cleans you out.