Seasonal-adjustments, coupled with an exceptionally warm December, and a surge in multi-family construction, especially in the Midwest led to a reported overall surge in housing starts.

The Census Department's New Residential Construction report has the details.

Housing Starts

Privately‐owned housing starts in December were at a seasonally adjusted annual rate of 1,608,000. This is 16.9 percent above the revised November estimate of 1,375,000 and is 40.8 percent above the December 2018 rate of 1,142,000. Single‐family housing starts in December were at a rate of 1,055,000; this is 11.2 percent above the revised November figure of 949,000. The December rate for units in buildings with five units or more was 536,000.

Building Permits

Privately‐owned housing units authorized by building permits in December were at a seasonally adjusted annual rate of 1,416,000. This is 3.9 percent below the revised November rate of 1,474,000, but is 5.8 percent above the December 2018 rate of 1,339,000. Single‐family authorizations in December were at a rate of 916,000; this is 0.5 percent below the revised November figure of 921,000. Authorizations of units in buildings with five units or more were at a rate of 458,000 in December. An estimated 1,368,800 housing units were authorized by building permits in 2019. This is 3.9 percent above the 2018 figure of 1,317,900.

Housing Completions

Privately‐owned housing completions in December were at a seasonally adjusted annual rate of 1,277,000. This is 5.1 percent above the revised November estimate of 1,215,000 and is 19.6 percent above the December 2018 rate of 1,068,000. Single‐family housing completions in December were at a rate of 912,000; this is 0.7 percent above the revised November rate of 906,000. The December rate for units in buildings with five units or more was 357,000. An estimated 1,250,600 housing units were completed in 2019. This is 5.6 percent above the 2018 figure of 1,184,900.

Housing Starts Seasonally Adjusted

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Housing Starts Not Seasonally Adjusted

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Massive Seasonal Adjustments

  • Not-adjusted housing starts rose from 103.1 to 108.5. This was reported at a seasonally-adjusted rate of 1,608 and a rise of 16.9%.
  • ​Not-adjusted single-family housing starts fell from 68.7 to 68.6. This was reported at a seasonally-adjusted rate of 1,055 and a rise of 11.2%
  • In the Midwest region, not-adjusted housing starts rose from 14.8 to 14.9. This was reported at a seasonally-adjusted rate of 254, and a rise of 37.3%.
  • In the Midwest region, not-adjusted single-family housing starts rose from 9.2 to 9.6. This was reported at a seasonally-adjusted rate of 180, and a whopping rise of 56.5%.

Actual Year-Over-Year Comparisons

  • The December 2018 to December 2019 actual year-over-year change in housing starts was up 3.2%.
  • The actual change in single-family units year-over-year was a mere 1.4%.
  • Year-over-year single-family construction fell 11.9% in the Northeast, 2.0% in the Midwest, and 3.8% in the West. The South saved the day, up 6.6%.

Seasonal Adjustments Gone Haywire

The seasonal adjustments went completely haywire in this report because of an exceptionally mild December, especially in the Midwest.

When I first saw the headline number I thought bond yields would be soaring through the roof. Instead, the 10-year note rose a mere 2 basis points.

Then a dive into the actual report confirmed the headline numbers are not what they seem to be.

Mike "Mish" Shedlock

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