What does it mean for rents?
Since the September 2022 peak, units under construction is down 19.6 percent.
Peak Numbers
- Total: 1.711 million in September of 2022
- Multifamily: 1.013 million in August of 2023
- Single Family: 990,000 in February of 2006 (830,000 in June 2022 peak)
Illegal immigration explains the date differences.
Single family peaked first.
Decline from Recent Peak
- Total: -19.6 Percent from September of 2022
- Multifamily: -25.8 Percent from August of 2023
- Single Family: -24.9 Percent from June of 2022
Despite the multifamily decline, the number of units under construction is still a whopping 752,000.
In isolation, that would be the largest number since 985,000 in September of 1973.
Also note the recent plunge in housing starts and permits.
Housing Starts Plunge 9.8 Percent to the Lowest Level in 5 Years
- Housing starts are down 31.0 percent from the cycle high of 1.82 million in April of 2022.
- Housing permits are down 27.4 percent from the cycle high of 1.92 million in January of 2022
- Completions are down 13.0 percent from a much later peak of 1.755 million in August of 2024.
For more details, please see Housing Starts Plunge 9.8 Percent to the Lowest Level in 5 Years
The homebuilders have spoken. And they don’t like what they see.
What it Means for Rents
Despite the drop in units under construction, the level is still very elevated historically.
If these units under construction are no longer needed due to Trump shutting the border, the price of rent rates to decline in areas that are overbuilt.
Also, if new home prices start falling, the price of existing homes won’t be far behind.
Inflation or Disinflation?
In isolation, the still very high units under construction constitutes pent up disinflationary pressures.
However, things are not in isolation. Tariffs are a short-term inflationary pressure. So are budget deficits.
In practice, the Fed is stuck between competing forces and elected to do nothing.
As noted yesterday, the Fed Projects Higher Unemployment and Higher Inflation Citing Tariffs
The Fed’s outlook has soured vs its March forecast. “We expect a meaningful rise in inflation in the coming months,” said Powell.
Powel noted the possibility of “tensions” in economic policy. That’s the stagflation outcome of rising prices and falling employment. “For the time being, the Fed is well positioned to wait.”
June 16, 2025: QCEW Report Shows Overstatement of Jobs by the BLS is Increasing
The discrepancy between QCEW and the BLS jobs report is rising.
There’s a very good chance rising unemployment and falling demand arrests the Fed’s expected inflation. But that assumes I am correct on weakening jobs.
Yeah Mister Mish, rents in Panama City Beach like for 3 bedroom townhomes are around $2100 per month, same price as in 2021 :-/
They stopped construction after breaking ground last year on the 232 unit Hathaway Luxury Apartments. The development is owned by RD Offutt Company, a major agriculture company in North Dakota.
Building anything in Florida is asking for disaster.
Hurricane roulette used to be reasonable before the gun was set up with five out of six chambers loaded with live ammunition!
Coastal Texas, Louisiana, Florida and South Carolina are not places I would invest in.
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agree. used to own ocean front and downtown charleston SC, properties, as investments and also my home for a decade in last century. costs of insurance……..and propensity to disaster are too high now. off topic. charleston the best eating town in usa. like france or italy. hard to find bad food. mostly delicious and fresh.
Close, however New Orleans is better by a little.
House builders know the market better than anyone. Their prices received net of incentives have been dropping. New houses are now cheaper than used ones – a rare situation – so the price of used ones is gonna go down too.
The non-retarded house price charts show recent tops for a steadily increasing number of metros. Months-of-supply is also surging as the spring selling season fizzles out … Too many buyers are priced out, and speculators realize it’s time to either book profits or else kiss them goodbye, so listings are surging.
Since the bubble is popping and builders don’t want to be stuck holding too many falling knives.
Relative to the prior bubble, it’s now looking a lot like late 2006 or early 2007. You can see that on Mish’s chart – first single-family rolled over, and now multi… same as in 2006-2007.
The big question in terms of recession (or not) is whether outmigration and/or mfg onshoring are sufficient to soak up the workers being dumped from residential construction jobs. So far unemployment hasn’t taken off so maybe we make it through? But the recent upticks are concerning.
Imagine the situation the homebuilders are in, Their entire corporations existence is to build and sell homes.
It seems that everyone is waiting for the market to crash.
New home inventories and existing homes for sale are at high levels. Building more inventory really does not make sense in an uncertain time.
We all watched in dismay as Trump brought our economy to a standstill during his last term. Consumers clearly have seen how unstable Trump is again in his second term. He is failing miserably to keep his campaign promises or control debt.
They also know that Trump has our troops invading American cities. They know he failed to end the Ukraine war. Failed to stop the Israeli invasion of Gaza, has us involved in the attacks on Iran and his tariff waffling has our corporations on hold until something he does makes sense.
Perhaps Trump will get his shit together and do something that makes sense, but so far, Trump is more lost than Biden on his worst day.
He does have a few accomplishments:
Anyone contemplating a large purchase such as a home, or the relocation of a business or a large capital outlay like building a factory is thinking twice or three times before pulling the trigger!
That covers a bit of it.
fantastic analysis of what is going on. thanks for sharing that.
The builders are afraid to add inventory because they have no idea which way the tariffs or interest rates are going. Any house started now could cost more than anticipated to complete and interest rates could make it unsellable.
The economic waters have been poisoned and builders are gun shy!
Banks are sitting on bad commercial real estate . This could easily be converted to multifamily units and rented or sold.
No, CRE cannot easily be converted to residential. Plumbing is one big issue among many – office towers were not built with enough pipes. Pretty much have to gut a building, and that isn’t cheap.
the comptroller of nyc about a year ago suggested most CRE office towers would be converted to labs and such. for sure conversion to residential is way too expensive with the modern buildings.
This subject came up awhile back on this site. It was in regards to affordability if I recall, and whoever read that, saw this coming.
There are simply not enough Buyers to buy these glut of houses for sale. There is enough money still sloshing around within the economy to do so, but the spendable portion is mostly in a small percentage of peoples hands. “Credit Scores” have been decimated by the college kids not paying up. They were the age of the upcoming most looking to be buyers, but not anymore.
Many of The Boomers are passing their houses down to the younger ones in the family, because most of their kids own homes already. That’s another buyer not buying. Then we have the sheer number of people that are simply broke and living pay check to paycheck. A massive number, and I believe it is growing by the day. No Buyers in this group. As the Boomers Homes are being gobbled up by family, the number dwindles on those Buyers as well.
This will eventually and probably sooner than later, cause prices to drop, by they will mostly have to drop below what they can bring them down to imo. These will leave a lot of foreclosed homes to hit the marker too. Even more buyers misdirected from the homes that the builders need to sell.
I see a potential for 18-25 singles joining forces to Rent Homes. Brings rent cost down, and if they are big enough, it allows or some privacy, unlike dorm or apt living. This will suck up inventory already built but available for rent. So more buyers not available for a bit.
We have also developed a more transient level of people. They like to be able to pick up and go, and rents allow that, while homes don’t. Families are dwindling in size, so again less need for larger homes, and we have a lot of them.
Banks could be the real dragon slayed in this unfolding event. That and Developers with lots of land locked up for building, but just not happening. Land with no income, but lots of expenses, doesn’t help out at all…
What worries me is that companies borrowing at very low rates will sweep in and buy available inventory and put them up for rent. It’s something from a business perspective I find appealing because it is a no-brainer but from personal view I find appalling.
I believe that this is is called Capitalism.
Capitalists do it all the time.
For alternatives see Socialism, Communism, Fascism, and the lesser -isms.
Yes, when unbridled it can end up with revolutionism. So you recommend I embrace my inner Shylock?
Not exactly. Bargain for gold, not for meat. 😉
The reason the market is so whacked is due to decades of socialist government intervention.
If you are referring to “Black Rock” type of exposure, and buy ups for rentals, I agree, but that is Capitalism as Lisa points out. I suppose some rules for “How Much” but that’s a slippery slope.
Some Banks could be blamed I suppose, if they are found to have pulled some shenanigans with the Book Keeping so to speak, but they are probably older Banks with Old Money on the books would be my guess.
Someone will have a lot of explaining to do, if this gets real ugly, and it’s not Capitalism, but greed, and backroom deals gone bad, but I digress…
Everything can be written off dollar / dollar by Blackrocks. Homeowners not so much. See 1040 Schedules for further details.
This has been going on for some time and is a contributor to the rising prices of RE. It should be illegal for corporations to buy houses for investment.
They did that back in 2009 – 2011 it was the start of the real corporate management of major portions of housing inventories. Most were purchased at huge discounts in tranches from the big banks that had packaged them after foreclosing on the homeowners.
Since then it has gotten far worse with many small family corporations being 5 – 10 homes for VRBO operations.
But the corporations remain the whales in removing housing inventory from the markets. Some are even building rental communities.
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Return of commune living?
So to speak I suppose… if I was single with these rents, I would be looking to live in the biggest house possible with 3-5 others around my age. Might take awhile to find a place comfortable enough, but so worth it I would suggest.
Powell is engineering a recession just ahead of mid-terms. Then will blame tariffs.
With deportations and self-deportations, the demand for housing will drop. Eventually, the population will stabilize, then decline. A blessing for the environment.
The stable genius, inadvertently, would have engineered an environmental revival.
The Nobel prize winning geniuses at Harvard and Yale will figure out the rest.
Instead of writing stale papers for forever growth, they will change the meme to stable decline.
/s
The next Dem President will open the border floodgates again.
Our entire economy, municipal bond issuances, stocks , real estate etc. is utterly dependent on population growth. Nothing about a capital economy is compatible declining population. Ask China how that rolls.
I put in a table that starts from 1970 and goes to 2024 showing that housing starts per capta has more than halved since 1970 with a big drop-off in 2007 and we never recovered. If you cut supply by half prices go through the roof. The table is waiting approval from God or perhaps Mish’s blog hosting service so I hope it appears soon.
If the population is dwindling why would you need more housing? Also, what about places like Detroit that have plenty of houses for sale for $1 but no one wants them?
It’s a lot more complicated than raw numbers. People move as we are constantly reminded here that “everyone is leaving blue cities and states” and presumably moving to red states. Well they may leave blue cities and states but they move to blue cities in red states but that’s a discussion for another day.
We have 5954 boomers that die each day, that housing should become freed up.
Only 38.899809% of the boomers have died so far, those numbers will accelerate quickly but it may not help if people are moving around.
Many rural areas are already ghost towns with plenty of abandoned homes and buildings.
My favorite website I have running in the background.
https://incendar.com/baby_boomer_deathclock.php
What an awesome site.
MPO45v2 is going to love this one since he can’t wait for boomers to be gone.
What I liked was if you can see an extinction date (year in which none are expected to be alive) for every cohort.
I can’t wait to see the Zoomers all gone. Oh wait…
The population isn’t swindling so you still won’t be able to buy real estate cheap. Have you thought of selling your soul to get the down payment?
You’re not paying attention sleepy Doug78, My USA real estate portfolio is full. I’m moving on to buying real estate overseas because there is better opportunities and more profits.
I won’t ask if you have an exit strategy because we both know you already exited.
I remember you saying a while back that you didn’t own a car and were happy you didn’t have to pay the costs. Now you say you own many houses. You should get your cover story straight. You are leaving too many holes.
What do owning real estate rentals have to do with owning a car? I don’t do anything for those properties, I have a management company that does everything, they send me money by direct deposit, don’t even need to walk to the mailbox for a check.
And
Do you understand now boomer? I know not owning a car is a strange concept to you but it’s possible.
Now after I leave America I may need to buy a car but it will be a cheap $15k BYD one. Probably charge it on my Amex.
When you leave Merica, can you stop posting here on mishtalk?
That would be preferred.
Keep in mind that whenever you rent, the owner pays all of those fees & taxes, so you’re really paying them, right? Oh, and they have to make a profit, right? Now, if you said that you rent your residence vs owning, then I would really question your sanity.
But I would have thought that a bro as smart as you & as well endowed with such gratuitous number of rental properties would have known this.
Are you sure you not some Chinese AI bot?
I’ll keep posting as long as Mish allows. I assume you want me out because I trigger you. Sad that you don’t have the fortitude to be able to handle it. Maybe that’s why you struggle so much?
You on the other hand have been banned a few times yet you keep coming back. Why?
Don’t worry about my wealth, it’s all good. Focus on scraping a few more pennies so you can buy that house you’ve always wanted.
Just playful rubbing, man.
I enjoy getting under your skin.
So we share at least one commonality.
Take care! See you on the next post.
Sure I believe you. You complained about the cost of insurance and maintenance of owning a car and now you say you are wealthy. If you were wealthy the cost of owning a car would be incidental even in a city. You do live in a city but you get around by bike and when you need a car you borrow one from your wife or kids? You must live alone then and either don’t have money to rent a car when you need it or you are a real miser who feels sick whenever you need to spend money. Your story has too many holes in it. At least keep it consistent.
Believe me or don’t believe me, it doesn’t matter. The curious thing is why you’re so obsessed with my non-car habits or the level of my wealth. You don’t need to be poor to complain about the costs of things. Warren Buffett famously drove a 10 year old car and bought used cars, never new so there’s plenty of precedent. He complains a lot about things too.
Let’s face it, you’re a broken old man with poor psychological well being. There’s nothing I can do about that for you Doug78, learn to be happy before you go meet your maker otherwise you’ll go to the place full of hate when you expire.
Why do you think that boomers dying off is going to free up housing? Do you think that every boomer alive is going to have their estate “go to the state” when they die? The boomer’s entire ambition in life was having offspring. To build wealth, a legacy, to leave substance and existence for the children they had. I would say you are 5% correct in that childless boomers homes will go up for sale. For the other 95% that had kids…..it’s getting handed down. This real estate gift to their children may get sold off in a few disgruntled families but not to most.
Unless a boomer only has ONE kid then something must be worked out as to who gets the house and who gets screwed. My boomer mother owns a house, when she passes on she said to sell the house and split the proceeds equally between ALL her children.
So how do you do that without selling the house? But let’s say one kid gets the house because he’s living in an apartment or renting a house. When the kid moves that leaves an apartment or a rental house open doesn’t it?
Now multiply the above scenario x 30 to 40 million and you tell me how housing doesn’t free up.
When I look at it from a per capita basis what jumps out is that we have been progressively underbuilding since the 1970’s with a notable halving in 2007 and we never recovered. No wonder housing prices exploded and became unaffordable. Why this happened is a good subject to discuss.
Unless you tell me a post is missing, I am unlikely to go to the spam bucket to look for things that may not be.
That said, your analysis is wrong.
Houses last decades so we are not underbuilding!
Proper analysis would look at the number of households, the total number of livable units and where they are, birthrates, and houses soon to be available in the boomer die-off.
That’s not an easy task.
Existing Home sales do not have these problems but they say nothing of the issue you are trying to address.
Then we should be filling in those numbers too.
Since 1970 the number of households has increased by 107%. 80 million units have been built since 1970 with approximately 5-6 million units being demolished or abandoned. That takes off some supply but not that much. Birth rate is in my opinion although I might be wrong. A household is a household if it has 2 or 10 members. Boomer deaths may help some but it all depends on emigration and that looks to be lower at least for the next few years. Adding in Boomer deaths increases supply of course but that would almost exactly be nullified by a one million hopefully legal immigrants per year.
Essentially to get house prices down we need to either build much more or bring in less immigrants otherwise prices stay high and the market remains quasi-blocked. There are geographical mismatches but we have seen that when one market fills up like California people move to markets not yet filled up like Texas or Florida. When they fill up they will move to virgin markets. The city to suburb migration will probably still be valid. As it is and as it probably will still be young people will still be priced out. It’s a great environment for those people and companies who rent out and bad for those who rent.
If households is only 2+ people that would explain a lot.
The number of households with single people in it has absolutely exploded due to things like divorce and with older people one spouse dying before the other. Then factor in that people getting married later so living on their own instead of being married / roommates.
That could explain why there is a big mismatch if indeed it’s not counting 1 person as a household.
True but that doesn’t explain why we have a continuing housebuilding deficit that has been severe since 2007. That part is a mystery for me.
Bernanke bankrupt half the home builders in the GFC. It’s little wonder there’s now a shortage.
Economists don’t know a debit from a credit. The remuneration of interbank demand deposits caused disintermediation of the thrifts.
That’s true.
If you can’t find evidence to support your hypothesis, it’s time to rethink the hypothesis.
I agree with Mish – There’s no building deficit.
The housing stock that’s been built up will last for a long, long time before they need replacing.
If there were a real housing shortage, we’d be reading endless whining news articles about people overcrowded into too few rooms. Stats on household size would show it soaring.
None of that is happening.
House prices are too high, but more because interest rates were driven too low (excess credit creation by the Fed and banks), leading to a speculative bubble. No one wanted to sell when prices were going up, because holding onto houses at 2.5% interest was like getting a free paycheck. The price surge artificially suppressed supply of existing home. Builders stepped in and production surged. But … Now that interest rates are back to normal levels, house prices in many areas are falling and inventory levels are surging as the speculators try to cash out before it’s too late.
Builders are slowing down because they see lower prices and tight margins ahead.
in some of the cities i’ve lived in, here in pax dumbfuckistan, many houses last centuries. i’ve owned many of them. bought one recently built in 1850. forget europe, and my homeland italia.
They still need upkeep or they fall in ruin quickly especially if the roof leaks. I have bought them too here in France and renovated them.
The Fed can be dissolved and do nothing just as well.