Gigantic Miss
Economists at Econoday expected construction spending to rise 0.4% in October. Instead, spending fell 0.8%.
Worse yet, the Census Department revised september spending from 0.5% to -0.3%.
All told that is a gigantic economic estimate miss of a full 2.0 percentage points.
Residential Construction
Despite glowing new home sales reports, residential construction spending peaked in February of 2018.
Government spending has kept total construction spending flat.
If this was a single report, I would suspect an outlier. But the key chart lines point to early 2018.
New Home Sales Highest in 12 Years
Six days ago I reported New Home Sales Highest in 12 Years.
Q: Does today’s report make sense?
A: Actually, it does.
Median Sales Price of Houses Sold for the United States
The median home sales price peaked in the fourth quarter of 2017.
Builders are building cheaper homes because no one can afford anything else.
Mike “Mish” Shedlock
you have the revisions story all wrong….The annualized September construction spending estimate was revised 0.6% higher, from $1,293.6 billion to $1,301.8 billion, while the annual rate of construction spending for August was revised nearly 1.5% higher, from $1,287.1 billion to $1,305.986 billion. The combined upward revisions of $27.1 billion to annualized August and September construction spending figures would be averaged over the 3 months of the quarter and increase the annualized 3rd quarter construction figure by around $9.0 billion ex any inflation adjustment, which would thus suggest a upward revision of about 0.20 percentage points to third quarter GDP when the third estimate is released on December 20th…
Too many shopping malls, not enough affordable housing.
Clearly the answer is more rent control to make sure no one ever wants to build more housing. More restrictive zoning laws. More tax abatements for shopping malls. More bureaucrats and more taxes against the middle class.
And even though these are clearly local decisions, blame Trump because that is what the media tells you to think. You must obey like a public school “graduate”.
I see more slow and low growth. Rates will decline again in 2020 and we get another refi boom along with cheaper prices of new homes to spur demand. If you are in the business of trading existing homes to make money you may have to take a bath on your last buy if you are competing with new home sales.
“The Oct construction spending report was much weaker than expected. That’s on top of huge negative revisions for Sept.”
…
This report not (too) bad. September actually revised UP. What happened was August had a large upward revision too, which made September look weak. About what I expected as long end of yield curve tanked 60 bps in August and EVERYONE piled in and locked in low rate (much of it since given back). Pulled forward demand which will weaken year end numbers (October first evidence).
Numbers are millions SAAR.
September report:
Aug … $1,287,054
Sept … $1,293,614
October report:
Aug … $1,305,986
Sept … $1,301, 764
Oct … $1,291,069
There’s a new housing development near me. Townhomes that range in price from $600k-$1m. The community will have roughly 1500 housing units when fully developed. They build entire blocks at a time. I would guess maybe 80 units per block. They started out by building 5 or so blocks a couple of years ago. They haven’t started any new blocks since. They continually have 1 last unit for sale. Which I assume is a marketing tactic. Either that or that last unit is a real dud.
Homelessness, hunger and shame: poverty is rampant in the richest country in the world. Over 40 million people in the United States live below the poverty line, twice as many as it was fifty years ago. It can happen very quickly. link to youtube.com
It’s sadly ironic that an obese guy is the apparent poster child for “poverty in America” according to the video above.
Cheap food is unhealthy and very high in calories. A lot of poor people are quite obese. Veggies and fruit are not cheap.
This is despite a massive “War on Poverty.” Massive government tax and spend didn’t do a damn thing to fix poverty, and I suspect the DW piece recommends more of the same to fix the problem. The poverty rate is about the same as in 1964 when the massive spending started. We’ve exported most of the unskilled and semi-skilled jobs. We destroyed the nuclear family at the low end of the economic spectrum with “public assistance.” We’ve promoted drugs and alcohol through direct advertising for one and trivialized the other by showing it to be humorous and fun in entertainment. We’ve demoted child rearing to pain in the ass status that lags far behind slaving away for the giant corporations that we claim to hate. We’ve demoted worship and institutions that promote ethical behavior by making them the butt of humor in media. In short, the root of our problems is not economic so much as ethical and moral. The prevailing trends do not lead to success. So long as we, as individuals, do not clean up our personal acts from the top of the economic spectrum to the bottom, things will not improve.
While what you’re saying about individual responsibility is no doubt true, poverty can be greatly reduced, by simply stopping the official plunder of productive people in all economic strata, for the benefits of idle incompetents at an ever dwindling “top.”
Printing money creates no new wealth. Yet it enriches asset owners, banksters, politicians and those close to them, ambulance chasers squabbling over who “owns” “the right” to the debased loot etc. Whose gains hence, by obviously simple arithmetic, comes at the expense of those not in those groups, including the “poor.”
Ditto restrictions the poor face on arranging their lives as they best see fit. Including slapping together a shed somewhere, anywhere, if they are homeless. Or even if they are not formally homeless, but feel they are paying too much rent or mortgage for what they get in return. Ditto living in their car. Or in a tent. While renting a mailbox, which for some reason which only make sense to a totalitarian sycophant, is only available if you already have a “home.”
The same holds for restrictions others face on helping the homeless. Such as offering them some money in return for them doing something. Without having to cut in an army of taxfeeders, and comply with all manners of nonsense put in place to keep ambulance chasers flush freeriding off of other’s productive work. Or, if you are a doctor or nurse displaced by a hurricane in the Philippines, offer your services over here for awhile, for a price more of “the poor” can afford… Again, without cutting in FIRE racketeer, ambulance chasers and the rest of the useless, privileged rabble.
Etc., etc… Systemic poverty, in a society as technologically advanced as the current day West, is not some sort of a natural given. Avoiding it, is not something which takes some massive amount of effort nor sacrifice. 300 years ago, things were a bit tough if you weren’t putting in the effort, but today, the basics are so efficiently produced, that the only systemic poverty left, is that which exist due to explicit policy: Connected leeches at the top stealing; and illiterate, well indoctrinated sycophants in the middle also desperate to cling to some sort of government bestowed privilege; by doing their best to pull of any ladder they, or their parents, may have afforded them access to.
Builders are building cheaper homes because they have to to maintain sales volumes. No builder wants to acknowledge the end of a business cycle, and the Fed’s capitulation allowed builders to extend and pretend for what will likely turn out to be a short window. Carpe diem as they say.
New home sales have been on a tear in recent months, but the euphoria already seems to be waning. The situation will likely look more somber a few months from now when the Fed’s parlor trick becomes readily apparent in the housing market. Enjoy those ridiculously easy year-over-year comparisons while they last.
The most recent pullback in home prices indicates a recession is 3-4 months away, if that.