Housing BOOM! 2
Housing BOOM! 2
Housing is a very important long leading indicator, and it reflects both the consumer and producer sides of the economy. And this morning, at least in terms of starts, it hit a grand slam.
Total housing starts were 1.608 million units annualized, the highest number since the end of 2006. The less volatile and slightly more leading permits declined slightly to 1.416 million units annualized, but the three month average of each made new expansion highs:
The story is the same with the less volatile single family starts and permits:
Finally, one point of difference I have had with That Other Blogger who writes about housing is that, because multi-unit housing, especially for younger buyers, can be something of a “substitution good” where single family house prices are beyond reach, I have suspected that multi-unit housing had not yet made its high for the cycle. And in terms of starts, that’s what this morning showed (permits made a huge spike high about 5 years ago the month a special housing program in NYC expired). Not only that, but multi-unit starts made a nearly 25 year high last month:
Lower mortgage rates have done what I expected them to do. It is an important reason why I expect the overall economy to improve later this year. And it is a *very* big argument against the producer slowdown turning into a full-blown recession.
UPDATE: We also got December industrial production this morning, down -0.3%. Industrial production is the King of Coincident Indicators. Here’s what it looks like since July 2014:
Note that, while it is down (in fact it is down -1.0% YoY), it hasn’t gotten any worse since last spring. And it isn’t down nearly as much as it was during the 2015-16 shallow industrial recession. This is one more brick in the wall of slowdown vs. recession.
Boy, your stubborn. There is no housing boom. That number is subjective and misleading. It also shows the average that is the housing market hasn’t risen since the summer of 2018.
There was a similar boost in apartments in 2015 that crashed the next month. Not very good for home starts in January. Permits and sales are leveling off.
Another point I disagree with, housing is no longer a long term indicator and frankly, it never really was outside the Boomer era.
Subprime consumer debt and corporate debt were way bigger movers this cycle which makes since with such weak lending rules. Both are teetering. Real final demand rose a whopping 5% with a “irrelevant” housing market in 2019. I think you need to rethink your position on this. My guess by the summer, you will. Debt is debt. As loans to auto purchases, student debt and general spending fall in 2019, the economy will lose traction outside just commodity based factors. Auto sales will decline dropping production. Less student loans means a blow to commercial real estate activity. Buybacks decline crashing over bought equity markets. It looks like December 2019 was the crest. Rising interest rates on the expansion underwriter, subprime consumer debt to stop bad loans, will stop spending cold. Debt can only rise so long NewDeal. By 2021, I suspect commercial lenders in these subprime markets to get culled. They should have lifted rates sooner. The default rate is atrocious. That little unnecessary March splurge last year was poorly thought out.
Just for your information, your RE cheerleading will struggle anyway as yry mortgage rates flatten out starting in May unless you can get even lower rates AND continued expansion. That means permits will fall and sales will lose traction YrY during last summer’s ramp as rates fell.