Housing Cools a Bit in September: What About the Longer Run?

By at 19 October, 2021, 2:20 pm

by Raymond J. Keating –

The U.S. Census Bureau latest report on housing permits and starts points to the housing market cooling just a bit. That’s not surprising given how hot housing has been during the pandemic, and given the many and varied supply chain and labor challenges. Indeed, an assortment of questions points to real uncertainty regarding housing, the small businesses in the industry, and the larger economy.

Specifically, building permits in September 2021 were down by 7.7 percent compared to the previous month, but were largely unchanged from September 2020.

As for housing starts in September 2021, they were down slightly – by 1.6 percent – versus August, and also at the basically the same level as September of last year.

But as noted in the following two charts, even with the declines suffered since the start of this year, building permits are up nicely compared to pre-pandemic levels, and starts versus their pre-December 2019 levels.

Source: Federal Reserve Bank of St. Louis, FRED

Source: Federal Reserve Bank of St. Louis, FRED

The Outlook: Policy and Other Variables

Assorted questions loom as we look ahead, however.

What is the effect of inflation on housing input costs, prices and interest rates? How much longer are supply chain problems going to persist? What about the striking number of people still not working? Will assorted anti-growth policies being pushed by the Biden administration and Congress be imposed and how bad will the fallout be? Are the declines in housing during 2021 going to continue?

All of these issues, and others, stand as very real potential negatives for housing – and for the small businesses that dominate the industry (for example, in the residential building construction sector, 92.3 percent of employer firms have fewer than 10 employees, and 97.4 percent fewer than 20 workers). In turn, housing matters a great deal to the overall economy and the direction of policy will determine the strength and resiliency of the industry moving forward.

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


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