Big Drops in Housing Starts and Permits – Looking Ahead

By at 21 May, 2020, 9:25 am

by Raymond J. Keating-

While the latest data on housing from the U.S. Census Bureau was predictably grim, housing is an area well worth watching in the coming months to gain a feel for just how deeply the effects of the COVID-19 pandemic might run.

The Census Bureau reported that housing starts (annualized seasonally adjusted data) dropped by 30.2 percent in April, and was down by 29.7 percent versus a year earlier. The April level of 891,000 was the lowest since February 2015.

Source: Federal Reserve Bank of St. Louis, FRED

As for building permits – which is an indicator of future housing starts – they were off by 20.8 percent versus March, and down by 19.2 percent compared to a year earlier. The 1.074 million level in April was the lowest since January 2015.

Source: Federal Reserve Bank of St. Louis, FRED

Looking ahead, what’s worth watching for are major shifts in how and where Americans will want to live. For example, there’s considerable speculation that cities will suffer, while the suburbs will thrive due to fallout from COVID-19. That is, close urban living has become less appealing, while detached single-family homes, with lawns and yards, will become far more attractive. If that in fact develops, it will signal a shift in what housing talking heads have been emphasizing in recent years, and that is, greater interest in city life over suburbia.

For good measure, one has to wonder if rural America, which has suffered so much in recent times, might also see some population movement in its direction. Of course, technology-availability questions linger there, mainly in terms of broadband access, and how steps on 5G might boost such communities.

Size of Firms by Number of Employees       Percent of Total Employer Firms in the Residential Building Construction Sector
Less than 10       92.6%
Less than 20       97.5%
Less than 100       99.7%
Less than 500       99.9%


At this point, this is all speculative. But the housing industry, of course, will be watching, reacting to, innovating and supplying new housing stock, eventually. And the residential housing construction industry, as noted above (latest Census Bureau data 2017), is all about small business.

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


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