Housing is Going Gangbusters, Thank Covid-19 and the Fed

Mish

Housing is going gangbusters. Let's discuss why.

Homebuilders the Biggest Beneficiary

Homebuilders remain the biggest beneficiary of Covid-19 thanks to the Fed's reaction to it. 

Housing starts, permits, and completions crashed in the initial months of the pandemic, but the Fed goosed housing with a commitment to hold interest rates low until they spot their measure of inflation.

The Census Bureau's New Residential Construction Report highlights the details. 

Building Permits 

  • Privately-owned housing units authorized by building permits in March were at a seasonally adjusted annual rate of 1,766,000. 
  • This is 2.7 percent above the revised February rate of 1,720,000 and is 30.2 percent above the March 2020 rate of 1,356,000. 
  • Single-family authorizations in March were at a rate of 1,199,000; this is 4.6 percent above the revised February figure of 1,146,000.
  • Authorizations of units in buildings with five units or more were at a rate of 508,000 in March. 

Housing Starts 

  • Privately-owned housing starts in March were at a seasonally adjusted annual rate of 1,739,000. 
  • This is 19.4 percent above the revised February estimate of 1,457,000 and is 37.0 percent above the March 2020 rate of 1,269,000. 
  • Single-family housing starts in March were at a rate of 1,238,000; this is 15.3 percent above the revised February figure of 1,074,000. 
  • The March rate for units in buildings with five units or more was 477,000. 

Housing Completions

  • Privately-owned housing completions in March were at a seasonally adjusted annual rate of 1,580,000. 
  • This is 16.6 percent above the revised February estimate of 1,355,000 and is 23.4 percent above the March 2020 rate of 1,280,000. 
  • Single-family housing completions in March were at a rate of 1,099,000; this is 5.3 percent above the revised February rate of 1,044,000. 
  • The March rate for units in buildings with five units or more was 476,000.

Starts and Permits Shatter Expectations

  • The Econoday consensus was 1.620 million starts at a Seasonally-Adjusted Annualized Rate (SAAR) vs the reported 1.739 million starts.
  • The Econoday consensus was 1.750 million permits at a Seasonally-Adjusted Annualized Rate (SAAR) vs the reported 1.766 million starts.

Median Sales Price of New Homes 

Median Sales Price of New Homes 2021-03

Median prices are not the best measure of price because size and quality are not factors. Instead, let's look at resales of the same house.

Case Shiller Home Price Index National and Top 10 by City 2021-01

No Inflation?!

The Fed does not count any of this as "inflation".

The Fed woodenly sticks to a definition of "inflation" that does not count home prices and dramatically undercounts the cost of medical care.

Easy Money Quote of the Day: Fed "Won't Take the Punch Bowl Away"

On March 25, I noted the Easy Money Quote of the Day: Fed "Won't Take the Punch Bowl Away"

Hello Fed, Inflation is Rampant and Obvious

For discussion of what's happening and how the Fed is purposely ignoring bubbles, please see Hello Fed, Inflation is Rampant and Obvious, Why Can't You See It?

Bubbles pop, however. The backside will be another Fed-sponsored disaster.

Mish

Comments (16)
Jojo
Jojo

A lot of homes are supposedly being brought by pension funds and investor groups. There should be some way to limit what these entities can purchase in the retail market because intentional or not, they aren't generally very price sensitive and their buying causes prices to ramp up for regular people who are just trying to get a roof over their head in a decent neighborhood. Of course, sellers who want the highest prices will disagree.

Mike 2112
Mike 2112

Is it possible the increased Housing starts are from ppl relocating away from cities?

Last June there was an article about contractors in NY's Sullivan County (about 125 miles north of NYC) who said they were booked thru the yr due to NYC residents moving up to this rural area with little housing stock.

Sechel
Sechel

My company began telling employees if you relocated far from work due to covid now is the time to relocate back as in the next several months we are expected back in the office.

numike
numike

Applications for New Businesses Have a Double-WTF Moment

People massively chased their dream and started new businesses, and that is wonderful. Then there’s the issue of large-scale PPP loan fraud. https://wolfstreet.com/2021/04/16/new-business-applications-have-a-double-wtf-moment/

shamrock
shamrock

"The Fed woodenly sticks to a definition of "inflation" that does not count home prices". Should they also count stock and bond prices as inflation?

Mike 2112
Mike 2112

No, b/c ppl need housing. They dont need stocks and bonds and therefore the general population is far less active in the Financial markets as they are in securing shelter via rent or mortgage.


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