Down and Up: Residential Housing in May

By at 19 June, 2019, 7:26 am

by Raymond J. Keating-

The latest report on housing construction from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development showed residential housing down … and up. How can that be?

Well, housing starts in May were down by 0.9 percent compared to April. However, building permits – which serves as a signal for what’s in the pipeline – grew by 0.3 percent over April’s level. That growth in permits was the strongest increase since December.

Unfortunately, housing data can be wildly volatile and subject to substantial revisions. When we look beyond the monthly data to the trends, as noted in the first chart below, housing starts plummeted from the start of 2006 to early 2011 – a housing depression – and we still have not recovered from that mess. The second chart, laying out the 10-year trend, shows more clearly that the housing recovery began in mid-2011 and ran until mid-2018. Since then, housing starts have been on a general, slight decline.

Source: Federal Reserve Bank of St. Louis, FRED

Source: Federal Reserve Bank of St. Louis, FRED

Building permits, after declining in January, February and March, have now grown in April and May. That hopefully points to some kind of trend re-starting growth in housing starts.

Make no mistake, housing matters when it comes to the overall economy. We saw what happened to the larger economy when housing went south form 2006 into 2011. Housing also matters when it comes to small business. The housing industry overwhelmingly is small business. For example, in the residential building construction industry, 97.4 percent of employer firms have fewer than 20 employees, and 99.7 percent fewer than 100 workers.

Further improving policy foundations – such as more substantive and permanent tax and regulatory relief, reining in government spending, and advancing free trade – would be good for economic, income and employment growth, for housing, and for small business.


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


News and Media Releases