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Bubble Watching In US Housing
Housing starts rose in May, but missed estimates on the heels of April's lackluster showing.
Starts logged a 1.572 million annual rate (figure below), short of the 1.63 million consensus. The range, from five-dozen economists, was 1.5 million to 1.735 million.
April was revised lower, to 1.517 million, representing a 12.1% decline compared to the originally reported 9.3% drop.
The rate for single-family starts was 1.098 million and multifamily 474,000. Completions dropped.
Permits missed t
“Demand isn’t really the issue in housing, or at least not yet. That comes later, when everyone who can afford a home already bought one, and everyone else is priced out of the market.”
To get into that better house buyers can afford people have to leave some other dwelling behind. As those units start to pile up and with effective demand falling (people are priced out) it is inevitable that those dwellings left behind will start to fall in price so others can afford to move up also. This is how the housing stock filters down until remaining units have no value and are eventually razed. That’s the theory, anyway. For sure for every new dwelling added to the standing stock and sold, an existing unit becomes available. For all those available units to sell the prices must eventually be lowered to pick up buyers not yet moved up to a better quality dwelling.
And all of that is assuming that the Fed doesn’t eventually raise rates.
So wait, we know what a bubble is now?
Only when it’s convenient for me — so, when I’m in a hurry to write a headline.