Housing Watch and Small Business

By at 20 November, 2018, 3:52 pm

by Raymond J. Keating-

Over two days, November 19 and 20, three key pieces of data on housing were published, and when taken together, they signal that housing warrants continued watching.

First came the National Association of Home Builders Housing Market Index. This measure of builder confidence took a dive in November – from an index measure of 68 to 60. That was the lowest level since August 2016. It also was the largest point drop since February 2014. At the same time, though, any measure above 50 indicates that builders see conditions as positive.

Second was housing starts. According to the U.S. Census Bureau, housing starts in October, at an adjusted annual rate of 1.228 million, were up by 1.5 percent versus September. However, October starts were down by 2.9 percent versus October 2017. While single family home starts actually declined in October by 1.8 percent, multiunit buildings rose by 6.2 percent. Both, again, though, were down versus October last year.

Third, building permits, at an adjusted annual rate of 1.263 million, in October were down by 0.6 percent versus the previous month, and down by 6.0 percent compared to October 2017.

The state of the housing industry matters to the overall economy. If anyone doubted this, they learned a hard fact when housing entered what turned out to be a housing depression in late 2005, with the entire economy suffering in a deep recession that began in late 2007.

In addition, housing very much is about small business. Consider that, for example, in the residential building construction industry, 80.7 percent of employer firms have fewer than 5 employees, 97.5 percent fewer than 20 workers, and 99.7 percent fewer than 100 employees.

Housing matters for the economy, and it is an industry overwhelmingly about small business. It also is an industry that warrants watching right now.


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


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