The Census Bureau and the U.S. Department of Housing and Urban Development said that residential construction activity remained weak for the second straight month. New housing starts increased 2.0 percent, up from an annualized 908,000 in February to 926,000 in March. Each of those figures, however, remain below the 1,072,000 rate observed in January. They reflect reduced activity in every region of the country, most notably in the Midwest, Northeast and West. Poor weather conditions have been a factor in some regions, and along those lines, starts in the Midwest and Northeast rebounded somewhat as they recovered from heavy snowstorms the month before. (continue reading…)
Tag: housing permits
Here is the summary for this week’s Monday Economic Report:
The U.S. economy has sputtered a bit in the early months of 2015. While it continues to grow modestly, several economic indicators are weaker than we would prefer. For example, manufacturing production decreased by 0.2 percent in February, declining for the third straight month. Many headwinds have combined to bring about this softness in the manufacturing sector, including global economic weakness, a strong U.S. dollar, the West Coast ports slowdown, a cautious consumer and the weather in some parts of the country. (continue reading…)
The Census Bureau and the U.S. Department of Housing and Urban Development said that residential construction activity plummeted in February, falling 17.0 percent. New housing starts declined from an annualized 1,081,000 in January to 897,000 in February. This was the slowest pace of housing starts since January 2014. Perhaps coincidently, that month was marred by a number of winter storms which were significant enough to lessen GDP and overall economic activity. This most recent report likely suffered from the same thing, particularly with major snowstorms in the Northeast and the Midwest, with starts in those two regions down 56.5 percent and 37.0 percent in February, respectively. Starts in the West were also weak, down 18.2 percent for the month. (continue reading…)
The Census Bureau and the U.S. Department of Housing and Urban Development said that residential construction activity pulled back a little in January. New housing starts declined from an annualized 1,087,000 in December to 1,065,000 in January. The good news was that starts have exceeded one million for five straight months, averaging 1,057,400 over that time period. Yet, the numbers for January were also somewhat softer than expected. (continue reading…)
The Census Bureau and the U.S. Department of Housing and Urban Development said that new residential construction rebounded in December. New housing starts rose from an annualized 1,043,000 in November to 1,089,000 in December. These data have been up and down for much of the second half of 2014, with December’s value not far from October’s 1,092,000 reading. The underlying story, however, is one of progress. Housing starts averaged 1,052,167 in the second half of 2014, which was a nice improvement from the 955,167 average observed in the first half. In continue to predict that housing starts will exceed 1.1 million in the coming months, and this latest data are relatively close to that mark. (continue reading…)
The Census Bureau and the U.S. Department of Housing and Urban Development said that housing activity eased somewhat in November. New residential construction starts decreased from a revised 1,045,000 at the annual rate in October to 1,028,000 in November. Despite the slightly decelerated pace, these data continue to show movement in the right direction. To illustrate this, new starts averaged 955,167 in the first half of 2014, but that average has shifted up to 1,032,400 in the five months so far in the second half. (continue reading…)
The Census Bureau and the U.S. Department of Housing and Urban Development said that housing data were mixed in October, but the overarching trend line remains positive. New housing starts eased somewhat, down from a revised 1,038,000 annualized units in September to 1,008,000 in October. Yet, housing permits – a proxy of future activity – rose from 1,031,000 to 1,080,000 units. That was the highest level of residential permitting since June 2008, suggesting movement in the right direction. In addition, new starts have also edged higher, up from an average of 955,167 in the first half of 2014 to 1,027,000 in the four months so far in the second half. (continue reading…)
The Census Bureau and the U.S. Department of Housing and Urban Development said that housing starts exceeded one million units again in September. It was the third time this year that it had done so, or the second in three months. Housing starts increased from an annualized 957,000 units in August to 1,017,000 in September. This continues a slow-but-steady trend upward, with an average of 978,111 so far in 2014 relative to an average of 930,000 for all of 2013. Still, there was relatively weak housing activity throughout much of the second half of last year and the first half of this year, and the latest data suggest that the data have begun to stabilize somewhat.
As usual, the bulk of the monthly change stemmed from an increase in the highly volatile multi-family segment. Multi-family housing starts rose from 318,000 at the annual rate in August to 371,000 in September, and the average year-to-date has been 353,667 units. Yet, multi-family starts have ranged from 314,000 in January to 446,000 in July, with large shifts from month to month. Even with such unpredictability, multi-family unit activity has trended higher, up 32.0 percent over the past 12 months.
At the same time, single-family starts were also higher, up from 639,000 to 646,000. The average through the first nine months of 2014 is 624,444, and year-over-year growth in September was 11.0 percent. The recent peak was 652,000 in July.
Meanwhile, housing permits mirrored many of these same developments, with permitting up from 1,003,000 to 1,018,000. On a year-over-year basis, housing permits grew 2.5 percent since September 2013. The underlying data were mixed, however. Multi-family permits were up from 376,000 to 394,000; whereas, single-family permitting edged slightly lower, down from 627,000 to 624,000. Permits for single-family homes have improved after bottoming out at 593,000 in February, but the data have been in a narrow range over much of the past year, with a year-over-year decline of 0.5 percent.
Nonetheless, we still remain optimistic about residential construction activity moving forward, and I would expect continued movement in the right direction, even with some volatility. I continue to predict housing starts solidly in the 1.1 million unit range by the beginning of 2015. One thing that might help spur more activity – beyond an improving economy, of course – is lower interest rates. According to Freddie Mac, average 30-year fixed mortgage rates fell to 3.97 percent this week, their lowest level since June 2013.
Chad Moutray is the chief economist, National Association of Manufacturers.
Here is the summary of this week’s Monday Economic Report:
Manufacturing production declined unexpectedly in August, led lower by reduced motor vehicle output. This drop was likely the result of automakers’ switching over to a new model year and summer vacations. Indeed, auto production has risen 8.1 percent over the past 12 months, continuing to make it one of the bright spots in the economy. Excluding autos, manufacturing output rose 0.1 percent, suggesting slightly better news for the broader sector. Still, the larger story is the accelerated pace of output seen since the winter months, with the year-over-year pace up from 1.6 percent in January to 4.0 percent in August. Durable and nondurable goods production has increased 5.6 percent and 2.2 percent year-over-year, respectively. Hopefully, the August figures reflect a brief pause before picking up again in September.
Regional sentiment surveys tend to suggest that this might be the case. The Empire State Manufacturing Survey from the New York Federal Reserve Bank said that business conditions rose at their fastest pace in nearly five years, with 46 percent of those taking the survey saying that the environment had improved in the month. At the same time, the Philadelphia Federal Reserve Bank’s Manufacturing Business Outlook Survey found healthy rates of growth in September, even as the pace pulled back slightly from very strong gains in August. Each of these two surveys reported higher levels for new orders and shipments, but they were mixed regarding hiring growth. Nonetheless, manufacturers in both districts were overwhelming upbeat about the next six months, with more than half of respondents predicting sales increases. Moreover, the Philly Fed found that a majority of those taking its survey expect production to increase in the third and fourth quarters.
Meanwhile, housing starts fell from an annualized 1,117,000 units in July to 956,000 in August. To be fair, the July figure—the second fastest pace since November 2007—was likely an outlier, and the pendulum—not unexpectedly—swung back somewhat. Yet, the slowdown in August was still disappointing. On the bright side, while single-family and multi-family unit starts and permits were both down, the highly volatile multi-family segment comprised the bulk of the decline. Looking at a longer time horizon, each has continued a slow, but steady upward trajectory. I continue to expect housing starts to be solidly at 1.1 million by year’s end. Indeed, home-builder confidence was equally optimistic about better figures moving forward, with the Housing Market Index at its highest level since November 2005.
The Federal Reserve Board provided the other major headline from last week. The Federal Open Market Committee (FOMC) began laying out its principles for winding down the extraordinary stimulus that it has pursued since the financial crisis at the end of 2008. The Fed will end its purchases of long-term and mortgage-backed securities after its October FOMC meeting, and the expectation is that short-term interest rates will begin to “normalize” at some point in 2015. The federal funds rate, however, will remain near zero for a “considerable time after the asset purchase program ends,” a statement that some suggest means that normalization will not occur until mid-2015 at the earliest. Fortunately, news that consumer and producer pricing pressures eased in August was likely welcomed at the FOMC because it takes some pressure off of the Fed to act sooner, at least for now. (Inflation has accelerated from where it was earlier in the year, but remains below the Fed’s stated 2.0 percent goal.)
In its FOMC statement, the Federal Reserve said that “economic activity is expanding at a moderate pace.” Nonetheless, it continues to worry about slack in the economy, particularly in labor markets. The Fed predicts growth this year of between 2.0 and 2.2 percent, with 2.6 to 3.0 percent real GDP growth next year. The unemployment rate is expected to fall to 5.9 or 6.0 percent by the end of 2014 and 5.4 to 5.6 percent by the end of 2015. In terms of inflation, the Fed forecasts prices growing by less than 2.0 percent over the next few years. If core inflation consistently exceeds 2.0 percent, it will give greater credence to hawks on the FOMC to increase rates sooner rather than later.
This week, we will get a sense of how manufacturing activity is faring globally with preliminary purchasing managers’ index (PMI) data from Markit for China, the Eurozone and the United States. The Chinese economy has begun to stabilize after slowing earlier in the year, but is still not growing by much. European growth has effectively come to a halt. In the United States, however, recent PMI data have reflected healthy gains in both demand and output over the summer months. We will also get new surveys from the Kansas City and Richmond Federal Reserve banks. Beyond those surveys, we will get the second revision to real GDP growth for the second quarter on Friday, with a consensus estimate of 4.3 percent growth, or just slightly higher than the previous 4.2 percent figure.
Other highlights this week include the latest data on consumer confidence, durable goods orders and shipments, and existing and new home sales.
Chad Moutray is the chief economist, National Association of Manufacturers.
The Census Bureau and the U.S. Department of Housing and Urban Development said that housing starts returned to Earth in August after a strong gain in July. Housing starts soared to a revised 1,117,000 units at the annual rate in July, their second-highest pace since November 2007. This figure fell to an annualized 956,000 in August, or a decline of 14.4 percent. Still, it represented an increase from June’s 909,000 figure, and over the past 12 months, housing starts have risen 8.0 percent. As such, despite the decrease in August, residential construction activity remains on an upward trajectory, albeit one that only gradually has moved higher with a lot of volatility from month to month.
The bulk of the decline in August stemmed from a falloff in multi-family housing starts, down from 458,000 to 313,000. Multi-family starts have averaged 352,375 per month year-to-date, with the August reading being the low-point so far this year. Yet, multi-family starts have risen 16.8 percent over the past 12 months. Even with such unpredictability from month to month, multi-family unit activity has trended higher.
At the same time, single-family starts were down from 659,000 in July to 643,000 in August. This figure has also increased over a longer time horizon, up from 583,000 in January and 617,000 in August 2013. As such, single-family housing starts have increased 4.2 percent year-over-year.
Meanwhile, housing permits mirrored many of these same developments, with permitting down from 1,057,000 in July to 998,000 in August. On a year-over-year basis, housing permits grew 5.3 percent since August 2013. Single-family (down from 631,000 to 626,000) and multi-family (down from 426,000 to 372,000) were both lower for the month, with the latter off more significantly.
Overall, the slowdown in new residential activity in August was disappointing, particularly given the strength seen in July. Moreover, it follows encouraging news on home builder sentiment, which improved to its highest level in nearly 9 years. Nonetheless, the July data were perhaps a bit too strong, and we should have expected the pendulum to swing back somewhat. Despite the decline in both starts and permits in August, the longer-term trend for housing remains positive, especially for single-family construction.
Moving forward, we would expect August’s housing data to remain above the one-million mark, with starts solidly at 1.1 million by year’s end, representing slow-but-steady progress in the residential market.
Chad Moutray is the chief economist, National Association of Manufacturers.