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Housing Starts, Permits Drop Sharply

The Commerce Department reported(.pdf) that housing starts and permits for new construction came in well below expectations last month, casting fresh doubt on the sustainability of the housing market rebound.

Housing starts fell 9.3 percent in June to a seasonally adjusted annual rate of 983,000, this coming after a drop of 7.3 percent in May that marked the worst two-month decline since late 2010, save for the sharp winter slowdown six months ago.

Building permits dropped 4.2 percent last month to a rate of 963,000 after a falling 5.1 percent the month prior, all but reversing the spring rebound.

From year ago levels, construction is still higher – up 7.5 percent for starts and 2.7 percent for permits – however, the recent trend should be disconcerting for anyone thinking that the construction industry was on a path back toward more normal levels as the latest readings are still nearly 50 percent below the pre-housing bubble norms.

In a separate report released yesterday, the National Association of Home Builders’ Housing Market Index rose to a six month high, due largely to an optimistic outlook for sales over the next six months.

In a survey where numbers above and below 50 indicate better or worse, respectively, the overall index jumped from 49 in June to 53 in July with the sales expectations component jumping 6 points to 64 and current sales rising 4 points to 57. Buyer traffic continues to be disappointing at just 39, however, it did rise 2 points this month.

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The Housing Market’s Lost Generation

There’s lots of compelling data in this Wall Street Journal story ($) about how millennials are getting off to a difficult start in life, asset accumulation-wise, due to a number of factors, most of which their baby-boomer overlords in government and banking seem to like just fine, yesterday’s student debt relief effort by the Obama Administration notwithstanding.

As it relates to housing, twenty-somethings have been notable no-shows in the recent housing boom for reasons that should be clear in the two graphics below.

Also see this CNBC report on a recent Wells Fargo survey that showed millennials being overwhelmed by debt as never before. It’s not unusual to spend your 20s treading water financially as you cope with finding your place in the world, but today’s younger set certainly seems to have the deck stacked against them.

Just wait til they find out in a couple decades that their baby boomer parents have had to spend their inheritance to make ends meet in their golden years.

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Big Usually Means Ugly

According to this LA Times story that was accompanied by the somewhat disturbing graphic reproduced below, after a short absence, McMansions have returned to Southern California.

The report opens with the instant classic “When the going gets less tough, Americans get stupid.” And it gets better from there, prompting some mid-2000s flashbacks from yours truly who sold a couple years before home prices peaked in the Golden State and had to sit back, as a lowly renter, and watch it all play out in slow motion.

If they’re doing what they did last time, it’s not just the size of the house that boggles the mind, it’s the ratio of the size of the house to the size of the lot which, in many cases made people like me just stop and laugh loudly when passing by.

Amazingly, being able to reach out the window of your 4,000 square foot home and shake hands with your neighbor who’s doing the same thing doesn’t bother some people.

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Housing Starts, Permits See Big Rebound

The U.S. housing market received some rare good news this morning as the Commerce Department reported(.pdf) that housing starts and permits for new construction both exceeded analysts’ estimates by wide margins, though the gains were due largely to multi-family home construction as activity for single-family homes was little changed.

Housing starts jumped 13.2 percent, from an upwardly revised annual rate of 947,000 units in March to 1.07 million units in April, far above expectations for an increase to a rate of 980,000 units and some 26.4 percent higher on a year-over-year basis.

Housing permits rose 8.0 percent, from an upwardly revised rate of 1.00 million units in March to 1.08 million units in April, considerably better than expectations for an increase to a 1.02 million rate and 3.8 percent higher than a year ago.

In both cases, the surge was due almost exclusively to volatile multi-family home building (of five or more units) where starts jumped 39.6 percent and permits rose 19.5 percent. Single-family home starts rose just 0.8 percent last month and permits edged 0.3 percent higher, making the headlines for this report much less than meets the eye.

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