Housing Slide Continued in May

By at 22 June, 2024, 9:53 am

by Raymond J. Keating –

Residential housing construction overwhelming is an industry about small businesses. For example, based on the latest Census Bureau data (2021), in the residential building construction sector:

● 92.3 percent of employer firms have fewer than 10 employees

● 97.3 percent fewer than 20

● 99.7 percent have fewer than 100 workers

So, the monthly Census Bureau data on housing permits and starts is a report about small business.

In May, housing starts came in at a seasonally adjusted annual rate of 1,277,000, which was down by 5.5 percent versus April, and down by 19.3 percent compared to May 2023.

As for building permits – which is a gauge of future starts – in May, they registered a seasonally adjusted annual rate of 1,386,000. That was down by 3.8 percent compared to April, and off by 9.5 percent versus May 2023.

Inside these numbers, single-family starts at 982,000 in May 2024 were down by 5.2 percent versus April, and by 1.7 percent compared to a year earlier. As for single-family building permits, those registered 949,000 in May 2024. That was down by 2.9 percent versus April, but up by 3.4 percent compared to a year earlier.

As noted in the following two charts, housing construction has been sliding at least since late 2023, but really since early 2022.

Source: Federal Reserve Bank of St. Louis, FRED

Source: Federal Reserve Bank of St. Louis, FRED

Meanwhile, according to the National Association of Home Builders, builder confidence was down in June, and registered its lowest reading since December 2023. NAHB Chairman Carl Harris, a custom home builder from Wichita, Kansas, explained:

“Persistently high mortgage rates are keeping many prospective buyers on the sidelines. Home builders are also dealing with higher rates for construction and development loans, chronic labor shortages and a dearth of buildable lots.”

Yes, there are policy implications here, obviously. Those would include getting the Fed to stop trying to manipulate the economy via interest rate changes (leave interest rates to the market, and just concentrate on getting the monetary base under control); Congress and the White House implementing productive immigration reforms that open doors to workers and entrepreneurs; and state and local government removing barriers to building.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest books on the economy are The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist, The Weekly Economist II: 52 More Quick Reads to Help You Think Like an Economist and The Weekly Economist III: Another 52 Quick Reads to Help You Think Like an Economist.


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