Housing Data Galore
Week in Review: July 18-22
Tons of data regarding the American Dream this week. Let’s do this.
And as a quick reminder to my Maryland readers, I’m conducting focus groups next Friday in Owings Mills and need volunteers. If you’re interested, more info here. Thanks!
NAHB/ Wells Fargo Housing Market Index
The National Association of Homebuilders describes this index as “the pulse of the single-family housing market.” Based on the most recent readings, we don’t need defibrillators or ventilators just yet, but keep them ready just in case. The Index fell from a reading of 67 in June to a reading of 55 in July. While any reading above 50 is ostensibly a good thing, there’s reason to fret. Why? This index is composed of three other indices that measure homebuilder sentiment. Homebuilders feel pretty good about single family sales at present (64), but downright pessimistic about the traffic of prospective buyers (37). The hammer of inflation, higher borrowing costs, and elevated selling prices resulting from surging construction delivery costs are set to produce an equilibrium associated with downward pressure on demand and sales.
Congressional Budget Office’s Economic Forecast & Explanation
This is more about the why and how of the forecast than what they’re actually predicting, but interesting throughout (if you’re interested in this kind of thing). The upshot: real potential GDP growth will be higher from 2022-2032 than it was from 2008-2021(but lower than any other period since 1950), though stagnant population growth is dragging down the forecast. I’m not sure how one comes to this conclusion given the lack of growth in working age population, massive national debt, fractured globalization, global warming, etc. Hope springs eternal!
Building Permits, Housing Starts, and Housing Completions
Authorizations for new housing units fell 0.6% in June and are up 1.4% over the past year according to the Monthly New Residential Construction report from the Census Bureau. Permitting for single family units fell pretty sharply in June (-8%), while permits for multifamily buildings with 5+ units surged 13.1% higher for the month. You can expect more of that going forward. Millennials are being induced to rent for lengthier periods because of low inventory of unsold homes, elevated prices, and now higher mortgage rates. Advantage multifamily.
Housing starts fell 2% in June and are down 6.3% from June 2021. The decline in single-family unit starts was even sharper, down 8.1% from May. Housing completions also fell pretty sharply in June, down 4.6% from May.
For a while now, there’s been an unusually large gap between permits and starts. One candidate explanation is that homes are simply taking longer to build due to labor shortages, component delays (e.g., garage doors), etc., but I’m starting to suspect builders are delaying starts due to the perilous outlook. The expectation of recession is also impacting energy investment one suspects, but before I digress further, let’s look for some more housing data.
Existing Home Sales
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