I’m a guy who — sad as this is for what it says about my social life in middle-age — is genuinely interested in the US government’s monthly update on new residential construction.
I didn’t see that for myself. From catering local stimulant parties and disrupting graduate seminars with inebriated, but cogent, rants about the peril of metricizing the social sciences, to refreshing census.gov at 8:30 AM for the latest HUD data. All in the short space of 15 years. And people wonder why I’m depressed.
Most people, though, couldn’t care less about this release. I have data to back up that assertion. Suffice to say coverage of housing starts and permits isn’t the first thing readers click on when they visit the site — unless I tempt them with a headline that promises to document a “plunge” or a “crash.”
Luckily for me on that score, housing starts did indeed plunge and crash in the US last month, and no, that isn’t hyperbole. The drop in overall new construction was 15.4% from April. That was “Juuuuust a bit outside” vis-à-vis consensus, which expected a 2% decline.
I should emphasize: May’s result looks even worse when you consider that April’s figures were revised to reflect a decline nearly triple the initially-reported drop.
Blame apartments. Multi-family construction showed a 40% drop. Single-family starts fell as well, although May’s drop, 1.9%, was much shallower than the prior month’s 11% decline.
The figure below shows you the disparity between the six-year low for the overall annualized rate and the pace for single-family construction.
For whatever this is worth, the decline on the “five units or more” series, a stunning 41.5%, was among the seven largest ever in data back to 1959.
Permits slipped in aggregate, but managed a slight gain for single-family units.
The figures come on the heels of yet another abysmal read on builder sentiment, which printed in “depressed” territory for the 26th consecutive month in June’s NAHB survey.
Builders this month complained that politicians are preventing them from meeting America’s demand for new housing. Tuesday’s government figures, with the usual caveat to account for how volatile this series is, don’t bode especially well for new supply.
I think this is playing out around the world. House prices rose significantly post covid, interest rates rose along with construction costs. House prices need to fall to give young people a future but that comes along with problems of its own. What happens when/if immigration starts to pick up again.
Why are builders claiming politicians are preventing them from meeting demand? I guess they are wanting interest rates cut too. All that will do is inflate house prices more?
I am happy that you are self incentivized to put this together.
I am truly interested on your view about metricizing the social sciences. I did not even know it was a thing, let alone a thing to concern about.
I am sad to read you feel depressed.
Social science types have long envied the endless possibilities for metrics available to the hard sciences, and finding new ways to metricize other than survey multiple choice (Likert) scales fills the literature (Look! New Graphs!). I think this pseudo-metricization may come at the expense of truly considered reasoning for identifiable trends in society. But I’m more a hard science type myself (though I’m no engineer), and this is more speculation than reasoned response, fueled largely by some years (decades ago now) in academia with as many friend/colleagues across the aisle in social spheres as in my own.
I mentioned in a comment a few days ago that I too was looking forward to this week’s housing data. While stocks and bonds concern so many of us, housing is quite literally where we live. Multi-family and commercial real estate are already crashing in some parts of the country, as lenders can no longer sit on low interest, “non-performing” loans, and are starting to accept markdowns to clear bad loans and properties off of their books. That’s the start of true price discovery that has been absent from the equation ever since COVID. If the over-all economy shudders, we could see the same process begin in residential housing later this year, as foreclosure filings and starts are already up about 14% YOY.
Builders may be complaining that they want to build more, but there are currently 500,000 more home sellers than buyers in the U.S. (Some data shows that number is even higher.) Sellers can’t understand why the offers they are receiving are not matching Zillow “Zestimates,” so many are pulling their listings (currently around 6%). The Northeast and Midwest are currently faring slightly better. I could go on but you get the point. Housing and real estate are starting to look a little dicey.
Thanks T-Dog. Like you said, these important things are being overshadowed by “AI all the time.”
Boy, this could be a sleeper populst issue which would challenge both sides of tha aisle. There’s a lot of dry tinder waiting for a spark…
In “normal times” housing pricing is directly related to the inflation. Gold rushes, army bases and now 25,000 employee AI centers will be outside of inflation for local districts. Supply and artificial demand trump normal but wait 5 years after the build out. Detroit? Loss of industrial base and no replacement.