Housing Construction vs Private Fixed Investment Notes
- It’s more than a bit unusual to plot thousands of units and billions of dollars on the same axis, but the chart conveys the important ideas.
- Single family construction is far more important than total units under construction.
- Private Residential Fixed Investment, a component of GDP follows single family with a lag that might be quite long.
Private Residential Housing Units vs Private Residential Fixed Investment
The second chart is the same as the first except that I added a line for multi-family, 5 or more units in a single building.
Total units under construction is still rising but private residential fixed construction is falling. Why is that?
Single-family construction is ~ 40% of residential private investment. Improvements and brokers’ commissions are ~ 50% of it.
And construction is the sum of the costs of inputs of all construction activity completed in a given period. pic.twitter.com/5MYMfvGZPd
— Sonu Varghese (@sonusvarghese) March 8, 2023
My charts above are quarterly charts. Let’s hone in on employment, the subject of my previous post, Idea of the Day: Construction Employment Saved the Economy But That’s Now Ending
I created some new charts to better highlight what’s happening.
Private Residential Housing vs Residential Building Employees Long Term
Once again I have an unusual left axis (thousands of units or thousands of employees), but again it ties everything together nicely.
The lags are considerable. Starts turn lower first while total units under construction flattens. Single family units under construction lags starts, and residential building employment tends to lag everything.
The dashed blue lines are examples of the preceding paragraph.
I prefer to use starts rather than permits because starts eventually gets finished, but permits may not result in starts for very long periods at turns.
Private Residential Housing vs Residential Building Employees Short Term
With total housing units flatlining and single family units under construction falling pretty hard, it’s likely that residential housing employment is poised to fall.
The rate of decline in employment will depend on how fast the units under construction finish.
No Rebound in Existing Home Sales Despite a Drop in Mortgage Rates
Meanwhile, please note No Rebound in Existing Home Sales Despite a Drop in Mortgage Rates
That matters too. Employment is not just a matter of new construction but also remodeling.
30-Year Mortgage Rates
Median Home Prices Fall for First Time in a Decade, But What Does It Mean?
On March 4, I asked Median Home Prices Fall for First Time in a Decade, But What Does It Mean?
People are pulling listings. With falling housing prices and slumping listings, remodeling work is also falling.
So is demand for appliances, furniture, landscaping etc. But with the service sector still humming (for now), Powell’s Hawkish Speech to Congress Sends Interest Rate Hike Odds Soaring
And mortgage rates are back above 7.0 percent. Who wants to trade a mortgage below 3.0 percent for a 7.0 percent mortgage.
Senator Elizabeth Warren Confronts Jerome Powell But She’s Not Worried About Inflation
Politically speaking, no matter whether you agree or disagree Senator Elizabeth Warren Confronts Jerome Powell But She’s Not Worried About Inflation
Finally, we all understand rate hikes act with a lag. None of us really know how big that lag is.
But here we are, and another half-point hike now seems baked in the cake on March 22.
Good luck with that.
This post originated at MishTalk.Com.
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