PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

U.S. Census Bureau Data: Housing Maintains its Strength

By at 20 February, 2020, 5:36 pm

by Raymond J. Keating-

The residential housing market stayed on a positive roll into the first month of 2020, and that’s good news for the small businesses that overwhelmingly dominate housing construction – with 97.4 percent of employer firms in the residential building construction industry having fewer than 20 employees – and for the economy in general.

According to the latest GDP data, private residential investment grew in the fourth quarter of 2019 by 5.8 percent, which was the second growth quarter in a row after a long stretch of declines.

The U.S. Census Bureau’s report on new residential housing construction for January 2020 mainly pointed to growth continuing into the new year.

In terms of annualized data, housing starts did decline by 3.6 percent in January 2020 versus December 2019. However, compared to a year earlier, housing starts were up by a robust 21.4 percent.

As for building permits – a measure of future construction – the January 2020 level was up by 9.2 percent compared to a month earlier, and had grown by 17.9 percent versus January 2019.

As noted in the two following charts, growth in both housing starts and building permits has been strong since the middle of 2019.

Source: Federal Reserve Bank of St. Louis, FRED

Source: Federal Reserve Bank of St. Louis, FRED

For a variety of reasons, the housing market had been a mess for a long stretch of time – arguably from early 2006 into 2017. That was due mainly to misguided government policies promoting “affordable housing,” which actually meant pushing policies that didn’t make housing more affordable but delinked sound economics and financing from home mortgages. Unfortunately, those misguided policies persist, and taxpayers could, again, pay a heavy price if the housing market suffers a major falloff.

For now, it’s most welcome to see growth in housing. Such investment certainly is a plus for the economy, and as long as housing decisions remain rooted in sound economics, we’ll hopefully see continued growth.

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

 

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