The Dive in Housing Construction Continues

By at 20 January, 2023, 9:42 am

by Raymond J. Keating –

The latest data from the U.S. Census Bureau showed that the recent dive in residential construction measures that started in May 2022 continued in December.

Specifically, residential housing starts registered a seasonally adjusted annual 1,382,000 in December 2022, which was down by 1.6 percent compared to November, and had declined by 21.8 percent versus December 2021.

Source: Federal Reserve Bank of St. Louis, FRED

Meanwhile, residential building permits – an indicator of future starts – came in at 1,330,000 in December 2022. That was down by 1.6 percent versus November, and off by 29.9 percent versus a year earlier.

It seems that the best one can detect on the housing front right now is that the National Association of Home Builders noted that the negative take among builders released on January 18 might have been a low: “A modest drop in interest rates helped to end a string of 12 straight monthly declines in builder confidence levels, although sentiment remains in bearish territory as builders continue to grapple with elevated construction costs, building material supply chain disruptions and challenging affordability conditions.”

As is the case with most sectors of the U.S. economy, housing construction is mostly about small businesses, with 97.3 percent of employer firms in residential building construction having fewer than 20 employees.

In the end, the housing sector shows that the Federal Reserve’s efforts to undermine the economy via interest rate increases have been a “success” – as do retail sales and industrial production. As to whether or not the Fed’s efforts have made sense as tools to bring down inflation is, to be very generous, an open question.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest book is The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist.


News and Media Releases