Today’s housing data are driving some optimistic headlines about the 1.6% increase in housing starts in March and the upward revisions to February data. Looking a bit deeper, however, one finds that single-family starts actually fell in March; all of the gain came in multi-family units.
As I’ve noted in previous posts (here, for example), I think it’s useful to look not only at the number of housing starts, but also at the number of houses under construction (which reflects the pace of both starts and completions). Why? Because that gives us a sense of how much construction activity is actually taking place:
As you would expect, the chart shows that the number of single-family homes under construction fell off a cliff in early 2006. Almost 1 million new single family homes were under construction in February 2006. Today there are just 305,000.
The precipitous decline ended last summer, and housing construction has now been flat for several months.
It would be interesting to consider how many excess houses were built between 2003 and 2006 relative to the LT moving average (looks like about 600,000 or so by eye, and perhaps even a few more from 1997-2003), and how that compares to the deficit over the last couple of years…are we back to neutal in net after the buidling binge or down a bit?
And how does the average (net if possible of housing leaving the base housing stock) compare to demographic growth, and what does that require in terms of increased rate of home ownership for the equation to balance?
DSM
Dan
You need to look at all housing units, not just single family homes. Best I can tell we had an over supply of about 1.6 million units at the end of 2006. This has been coming down as completions have been falling. (Down to 646K in March)
On the other hand the total number of households only increased by 400K last year rather than the more normal 1M+
For links to data and back of the envelop calculations see http://azecon.blogspot.com/2009/12/housing-numbers-year-later.html
I’m not sure that a change in the interest rate really changes the number of housing units we consume. I think it changes who owns the unit (landlord or resident) but not the total number of units.