Hoot of the day: The Bloomberg Econoday consensus had housing starts and permits both rising. Several charts show how much they dropped. 
Unexpected Disaster
The Commerce Department New Residential Construction report for May 2024 was an unexpected disaster.
The Bloomberg Econoday consensus was for a 1 percent rise in starts and a 0.7 percent rise in permits. Instead, starts fell 5.5 percent on top of negative revisions. Excluding revisions, starts fell 6.1 percent. Permits dropped 3.8 percent.
Why this was unexpected is a mystery other than economists seem to be the most optimistic people on the planet except for politicians speaking about themselves.
Housing Report Details
- Building Permits: Privately‐owned housing units authorized by building permits in May were at a seasonally adjusted annual rate of 1,386,000. This is 3.8 percent below the revised April rate of 1,440,000 and is 9.5 percent below the May 2023 rate of 1,532,000. Single‐family authorizations in May were at a rate of 949,000; this is 2.9 percent below the revised April figure of 977,000. Authorizations of units in buildings with five units or more were at a rate of 382,000 in May.
- Housing Starts: Privately‐owned housing starts in May were at a seasonally adjusted annual rate of 1,277,000. This is 5.5 percent (±9.4 percent) below the revised April estimate of 1,352,000 and is 19.3 percent (±10.0 percent) below the May 2023 rate of 1,583,000. Single‐family housing starts in May were at a rate of 982,000; this is 5.2 percent (±9.9 percent) below the revised April figure of 1,036,000. The May rate for units in buildings with five units or more was 278,000.
- Housing Completions: Privately‐owned housing completions in May were at a seasonally adjusted annual rate of 1,514,000. This is 8.4 percent (±9.8 percent) below the revised April estimate of 1,652,000, but is 1.0 percent (±10.6 percent) above the May 2023 rate of 1,499,000. Single‐family housing completions in May were at a rate of 1,027,000; this is 8.5 percent (±10.1 percent) below the revised April rate of 1,122,000. The May rate for units in buildings with five units or more was 479,000.
Housing Starts Single Family vs Multi-Family
Single Family vs Multi-Family Details
- Housing starts are down 30.1 percent from the April 2022 high to 1,277,000 units (blue highlight). That’s the smallest number since June of 2020 (yellow highlights).
- Single-Family starts are down 19.6 percent from the November 2021 high, but they are up 23.4 percent from the November 2022 low (red highlights).
- Multi-family has crashed (green highlights). Multi-family is down 53.0 percent from the April 2022 high.
Fed rate hikes have clearly taken a toll on housing but it has impacted multi-family construction more.
Where Do We Put 8 Million Illegal Immigrants?
On May 23, I asked Where Do We Put 8 Million Illegal Immigrants?
Millions of immigrants keep pouring in. New residential construction has stalled and multi-family construction is in decline. Completions are rising, but is that enough housing?
One of Every Five New York City Hotels is Now a Migrant Shelter
On June 2, I noted One of Every Five New York City Hotels is Now a Migrant Shelter
New York City hotel prices have never been higher. Illegal immigration is part of the reason why. Mayoral graft is another.
Don’t worry, LA has the affordable housing solution starting with “affordable housing units at $600,000 each to house 278 homeless out of 75,518 in the county.
Please note A New High-Rise Building Will House the LA Homeless in $600,000 Units
If the county were to shelter the 75,518 homeless, the cost would be $45,310,800,000. That’s $45.3 billion, excluding free property taxes, case workers, maintenance, utilities, insurance, food, police, clothes, doormen, or medical care.
And it would not stop there. Every homeless person in the state would move their tent to LA to participate.
This dear woke fans is what’s known as “affordable housing”.
Clearly, the proper solution is to do the same thing for 8 million illegal migrants. After all, free food, free clothes, and free shelter is a right.
This was completely foreseeable. As someone who built his own house, I can say that skilled trades people who know framing, electrical, plumbing,etc., are literally dying off. I spent my youth working for my father and learning how to use my hands to produce something. When I was finished my day, I could see with my own eyes what I had produced that day.
Playing video games with dad will teach a child nothing and produces nothing. We will soon see this trend in agriculture as news reports explain farmers can’t find useful help. Legal immigration of skilled labour is the only solution combined with Mike Rowe teaching children that their hands are for more than scrolling across a screen.
We may be seeing some movement in the elderly bottleneck. Based on my own circle, I see some people starting to move out of their homes to smaller units thus freeing up valuable single family homes for families. May be a mirage or finally a trend.
Inflationary pressures will be one cause. Insurance rates, Maintenance and Materials, and Utilities are way up. This will force some hands but then WHERE TO THEY GO?
The inflationary depression is roaring on unabated, crushing everything in it’s path, putting hundreds of millions of lives on hold, destroying hope, ambition, and enterprise. Becoming an inferno fueled by massive further inflation to protect the unearned ‘assets’ and ‘equities’ of the bloater class. No ‘recession’ is allowed.
Genius DC/Fed policy of over 20 years (designed to paper over China kicking our ass competitively) has led to the worst era of mal-investment in human history.
2002-2008 – Vast idiot boom in CDO funded McMansions even as US workforce rotted away.
2009-2020 – *Continuing* vast underinvestment in *reasonably priced* US homes (see US construction jobs) even as levered financial speculation in US home market (and everything else) continues.
2020-2022 – Somehow 1 million pandemic deaths/rapidly aging population leads to 50% spike in existing housing demand/prices. There are no words.
2022+ – After 20 years of ZIRP-fueled delusion, Fed awakes to ruin it has…funded. Forced to spike interest rates (after 20 years of money-printing, interest rate strangulation) – *just* as American demand for new housing (requiring financing) becomes desperate.
It is like the Fed long ago committed itself to being the lobotomized sex-slave of DC’s fiscal/policy pathologies.
Also blame a growing amount (or %) of women entering the workforce for those rising real estate prices in the past say 30 to 40 year.
The “No Recession Lie” continues. LYING BY OMISSION is still a LIE.
My 2 cents.
1. Single family starts is a far better indicator and nope, it hasn’t fallen that much and is above precovid. You know that Mish
2. Multi family were part of the commercial re decline
3. Why immigration declined after December, it’s fallen off the table the last 6 weeks. My guess 3rd quarter stories of thinning “herds” will start popping in the media.
4. Corporate spending on infrastructure is huge right now. My company is having the most demand since the 70’s. Putin’s war has generated even more demand. Imo, this is classic capital rotation.
Nope, no recession. If anything, the real unemployment rate is closer to 3%. Sadly, the bls and its elites have failed the country with poorly sampled data. It ain’t all “immigrants” either. How they handled covid deaths on population controls was abysmal.
A far better indicator of what?
If you mean kids – I agree
And maybe not even *that*.
The 2021-2022 boom in household formation (*way* above historical rates) is at least arguably mysterioso.
On the one hand, “excess savings” (weird given year of forgone work…) and being cooped up with disease-vector roommates might have spiked the household formation rate.
Maybe.
But I don’t know if,
1) The worst economic dislocation in world history for 70 years inspires “let me go grab a half mil mortgage”
2) Ditto witnessing 1 million excess deaths,
And…those legendary “excess savings” – sleeping with the fishes since March 2024.
Starts are pretty meaningless without completions…and the now long-standing “Mystery of the Missing Completions” is discussed multiple times on this site.
A permit or license is something that allows you to do something that would otherwise be illegal.
Building permits cost too much!!!!
But they might let you head-fake competitors out of starting their own competing housing supply…
Yes the big players favor environmental laws also because the compliance, testing and paperwork is too expensive for the small guy to remain profitable even if they are doing the exact same thing in the exact same way
I smell a bout of deflation in all assets. This is necessary as the covid induced rates and stimulus were always unsustainable. The Fed should stand strong and not cut rates.
Where do we put the flood of illegal immigrants? On a bus back over the border is logical. We need more economically self sufficient productive people so bring those in on green cards. We need fewer illiterate charity cases. Ship them out on anything that rolls or floats.
Oddly the new President of Mexico is offering help to the US to send migrants directly back to country of origin. It would mean they made the multi thousand mile trek for nothing. That alone would probably prevent the same person from trying again.
Bus production is down.
New privately owned under construction 5+ units (ex single homes) : down from 1,004K from July 2023 to 898K. Since completed ready for sale are piling (not in construction) and new starts are down 50%, the housing market is in troubles.
The illegals will live in company provided dorms, to work in the reshored manufacturing industries.
In factories that have “suicide nets” installed around the perimeter.
Blurt and Bam, you are both describing manufacturing facilities in China. Some have installed suicide nets. And many Chinese workers live in dorms adjacent to the factories they work in. Many travel thousands of miles and rarely see their families.
Yea, yea, “hard wall” housing slowing … that’s the plan for green-depop.
New-speak forecasters measure “soft wall” housing … tent and blue-tarp sales.
Deeply disturbing numbers
If NVDA halved from here, it would take the stock back 4 months ago. I you weren’t around in the Tech Bubble and then the Financial Bubble, good luck. The wheels are coming off. Headlines and fin news all entertainment. When FED cuts, you will hear the giant sucking sound of the recession.
And all the NVDA talking heads on CNBC will say that a pull back is expected given how far it has ran. Then they will tell you to hang in there because it CAN’T GO ANY LOWER.
They CAN and DO have it both ways since they are one of two talking head outlets on TV.
NVDA is 10% of the s&p500, if it halved that would knock 5% off the index.
And that just helps to get the ball rolling, Newton style.
Falling refrigerator and freezer sales result in loss of low-cost housing under the bridge.
Watch the pice of the stocks of Whirlpool (think: refrigirators) over the last 5 years.
Rates matter. Housing and CRE are getting hammered as a result. Higher rates are finally taking a toll on the economy and they will ultimately crush the markets. They always do.
Nope. Housing is irrelevant. You forgetting infrastructure spending by corps is through the roof. Prime age population adjusted, a bigger spike than y2k. Just construction workers have better gigs. It’s why trucking indicators are near cycle tops. Post smarter.
this is crowding out multi’s. Note, single family starts barely have budged.
Housing DOES matter. New mortgage applications are at a 30 year low. One has to keep in mind that new mortgages inject new money into the economy while at the same time repaying principal (think: mortgages) remains at a very high level (= removing money from the market).
Agree.
It matters if mortgage rates are at 3% or at 7%. A VERY simple calculation (I can name 3 reasons why this calculation is so simple) show that mortgage costs (think: paying interest + paying principal) have (almost) doubled from the year 2021 up to now.
In order to keep housing affordable the price of an average has come down by some 50%.