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Housing Starts Plunge 14.4 Percent But From a Significant Upward Revision

Housing starts took a deep dive in May. Some of the sting is lessened by an upward revision, but the slowdown looks ugly.
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Housing data from commerce department, chart by Mish

Housing data from commerce department, chart by Mish

The Census Department's New Residential Construction reports has the starts, permits, and completions data for May, 2022.

Building Permits 

  • Privately‐owned housing units authorized by building permits in May were at a seasonally adjusted annual rate of 1,695,000. This is 7.0 percent below the revised April rate of 1,823,000, but is 0.2 percent above the May 2021 rate of 1,691,000.
  • Single‐family authorizations in May were at a rate of 1,048,000; this is 5.5 percent below the revised April figure of 1,109,000. 
  • Authorizations of units in buildings with five units or more were at a rate of 592,000 in May. 

Housing Starts 

  • Privately‐owned housing starts in May were at a seasonally adjusted annual rate of 1,549,000. This is 14.4 percent below the revised April estimate of 1,810,000 and is 3.5 percent below the May 2021 rate of 1,605,000. 
  • Single‐family housing starts in May were at a rate of 1,051,000; this is 9.2 percent below the revised April figure of 1,157,000. 
  • The May rate for units in buildings with five units or more was 469,000. 

Housing Completions 

  • Privately‐owned housing completions in May were at a seasonally adjusted annual rate of 1,465,000. This is 9.1 percent above the revised April estimate of 1,343,000 and is 9.3 percent above the May 2021 rate of 1,340,000. 
  • Single‐family housing completions in May were at a rate of 1,043,000; this is 2.8 percent above the revised April rate of 1,015,000. 
  • The May rate for units in buildings with five units or more was 417,000.  

Housing Starts Single Family vs Multi-Family 

Housing data from commerce department, chart by Mish

Housing data from commerce department, chart by Mish

Housing Starts, Permits, Completions Not Adjusted 

Housing data from commerce department, chart by Mish

Housing data from commerce department, chart by Mish

Seasonally-adjusted, annualized numbers have a way of making increases and declines as well as the overall numbers look much worse or better than reality to persons not familiar with how adjustments work.

To put things into perspective, there were actually 138,000 starts in May. After adjustments, starts are reported as 1,549,000 units.

Many disagree with these seasonal adjustments. However, it is the best way of looking at monthly changes. Year-over-year comparisons are best done with unadjusted numbers.

New Homes For Sale by Stage of Construction

New Homes for Sale data from Commerce Department, chart by Mish

New Homes for Sale data from Commerce Department, chart by Mish

The above data is from the April new home sales report not the above housing starts data. 

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For discussion, please see New Home Sales Plunge 22.5% In April, 16.6% From Deep Negative Revisions

An even better way of looking at upcoming supply is total units under construction.

Housing Units Under Construction

Housing units under construction data from Commerce Department, chart by Mish

Housing units under construction data from Commerce Department, chart by Mish

There is a record 1.6 million units under construction. 

How Far Behind the Curve is the BLS and Fed on Rent Inflation?

National Rent data from ApartmentList, OER and Primary Residence from the BLS, chart by Mish

National Rent data from ApartmentList, OER and Primary Residence from the BLS, chart by Mish

Rent of primary residence and Owners' Equivalent Rent make up over 31 percent of the CPI. Rent has been on a tear. 

On June 2, I asked How Far Behind the Curve is the BLS and Fed on Rent Inflation?

There will be upward pressure on rent in the CPI for the next three to six months. Then what?

With housing starts about to plunge are there enough units in the pipeline to cool rent prices?

I do not know the answer, but if it's no (or will take a long time to kick in), the Fed will have one hell of a time getting inflation down without crushing the economy. 

This post originated at MishTalk.Com.

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