A Mixed Story on Housing – Still a Long Climb Ahead

By at 20 July, 2017, 3:50 pm

by Raymond J. Keating-

The housing industry, of course, is dominated by small businesses. Consider, for example, that in the residential building construction industry, among employer firms, 81 percent have fewer than five workers, and 97.6 percent have less than 20 employees.

Of course, housing was hit hardest during the recession, actually leading the nation into decline. In 2006, for example, there were 197,600 employer firms in the residential building construction industry, and that number dropped to 158,509 in 2014 (latest Census Bureau data). That’s a staggering 19.8 percent decline.

So, housing is still far from back to its pre-housing/recession meltdown. But what do the latest numbers tell us?

On July 18th, the monthly confidence gauge from the National Association of Home Builders declined by two points in July to 64. The index has been steadily declining since March, after jumping higher in December of last year. While homebuilders seem to like what they hear from the Trump administration regarding regulatory relief, the industry clearly did not like the administration’s announced 20 percent tariff on Canadian softwood lumber imports. As the National Association of Home Builders reported:

“NAHB estimates that the annual impact of the 19.88 percent duty, if in effect throughout 2017,” would mean the loss of $498.3 million in wages and salaries for U.S. workers, $350.2 million in taxes and other revenue for governments, and 8,241 full-time U.S. jobs. NAHB points out: “Many of the jobs are in construction, but the effects are not limited to a single industry, as wages and jobs are also lost in businesses that sell and transport building materials, provide architecture and engineering services, etc. Some jobs are gained in the U.S. sawmill industry, but this is almost entirely offset by losses in other manufacturing industries.”

As for the latest on housing starts and permits from the U.S. Census Bureau, housing starts increased by 8.3 percent in June, while building permits for June were up 7.4 percent. Those are solid numbers, but it also must be noted that 1.215 thousand housing starts in June were still off from 1.288 thousand in February 2017 and from 1.328 thousand in October of last year. Similarly, building permits of 1.254 thousand in June were down from 1.300 thousand in January 2017.

To put these numbers in longer term perspective, the recent low in housing starts was registered in April 2009 at 478,000, and the recent high came in at 2.273 thousand in January 2006. The monthly average since 1959 registers 1.437 thousand.

As in other areas, small businesses dominate the housing industry, and they will clearly benefit from tax reform and relief, regulatory reform and relief, and reducing, rather than increasing, barriers to international trade.


Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

Keating’s latest book published by SBE Council is titled Unleashing Small Business Through IP:  The Role of Intellectual Property in Driving Entrepreneurship, Innovation and Investment and it is available free on SBE Council’s website here.

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