The Latest Housing Data and Sentiment

By at 18 October, 2019, 8:39 am

by Raymond J. Keating-

Housing data tends to be volatile from month to month and frequently subject to substantial revisions. After big jumps in both housing starts and permits in August, the latest housing report from the U.S. Census Bureau showed declines in September.

That being the case, it is worth noting that builder confidence has hit a 20-month high. According to the latest National Association of Homebuilders/Wells Fargo Housing Market Index released on October 16: “All the HMI indices posted gains in October. The HMI index gauging current sales conditions increased three points to 78, the component measuring sales expectations in the next six months jumped six points to 76 and the measure charting traffic of prospective buyers rose four points to 54.”

Back to the data.

Housing starts (seasonally adjusted annual rate) declined by 9.4 percent in September. Compared to a year earlier, the September level of housing starts was only up by 1.6 percent compared to September last year. Also, housing starts have not seen any real growth going back to the beginning of 2018. (See the following chart.)

Source: Federal Reserve Bank of St. Louis, FRED

It’s also worth noting that housing still has not returned to healthy levels, as seen in the following historical chart.

Source: Federal Reserve Bank of St. Louis, FRED

As for housing permits – a gauge for future housing construction – they declined by 2.7 percent. But permits were up by 7.7 percent compared to a year earlier.

Source: Federal Reserve Bank of St. Louis, FRED

In fact, even with the decline in September, housing permits have generally moved up notably over the past three months. Hopefully, that’s a positive sign for housing starts going forward as the builder confidence survey indicates.

The health of U.S. housing is important to the economy, both in terms of residential investment and GDP growth. In terms of the bulk of businesses in the housing sector, 97.4 percent of employer firms in the residential building construction industry having fewer than 20 employees. A health housing sector is also critical for America’s small businesses.

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


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