It wasn’t all bad news on the economic front in the US Thursday although, as noted somewhat abrasively here, the idea that 900,000 initial jobless claims is somehow “good” just because it came in below economists’ forecasts is tragically farcical.
Outside of data from the labor market (you know, that place where real people work to earn the money they need to feed their families), Thursday’s data was decent.
Everyone knows the US housing market is doing well. True to form, housing starts posted a fourth straight monthly gain in December, on the way to hitting a 1.67 million annualized rate. That’s the highest since — you guessed it — the housing mania.
It’s a giant flaming marshmallow. (Remember: I’m getting tired of “bubble.” So, I’m going with “giant flaming marshmallow” from now on.)
The headline figure was better than even the most optimistic estimates.
And it didn’t stop there. Permits rose to a 1.71 million annual rate. That also topped the high-end of the range. Economists were looking for between 1.55 million and 1.68 million there.
There’s no mystery here. This is the same narrative over and over. The pandemic triggered a flight to the suburbs or, at the least, rekindled the notion of “home as a sanctuary,” as someone put it last year. Fed accommodation helped push mortgage rates to record lows, thus stoking the fire.
Ultimately, signs of froth were everywhere in the US housing market by the end of 2020, and some say the market is likely to heat up further in 2021.
Elsewhere, the Philly Fed beat. At 26.5 for January, the headline was easily ahead of estimates, and now sits at pre-pandemic levels.
The new orders gauge jumped markedly, from 1.9 to 30, and indexes for employment and prices surged as well.
Responses to the survey’s special questions this month indicated that “most firms (64%) reported an increase in underlying demand [and] over 69% anticipate increasing production in the first quarter.” Of those firms, more than half said they intended to accomplish that increase via additional workers.
That’s good news. Maybe they can hire some of the 900,000 people who filed for unemployment benefits last week. You can reach those folks in the living rooms of their brand new homes.
The housing starts are one major benefit of the asset inflation we’re seeing. The higher the prices are, the more houses will be built to take advantage of the higher prices. Hopefully that will help ease some of the higher prices even if the post-Great Recession era led to a huge deficit in housing stock and it will take a while to make up for that. I do wonder what will happen to all those high end luxury apartments that have been built in cities. Might it become affordable to live in a major city again?
I mean ultimately the problem is housing around growing cities suffer from commute creep. Sure you can go farther out but eventually getting to work in under an hour has significant financial value. More if you have children and despite everything we learned this year… most companies want you warming chairs in an office. Print money or don’t… you still can’t make more land appear in proximity to workplaces. I don’t doubt we’ll get another dip but long term I expect housing to outpace a lot of other investments especially given that rents will likely resume uptrends when we exit this crisis.