The freefall in housing continues, but with a silver lining:
HOUSING STARTS: Privately-owned housing starts in May were at a seasonally adjusted annual rate of 975,000. This is 3.3 percent (±10.7%)* below the revised April estimate of 1,008,000 and is 32.1 percent (±5.1%) below the revised May 2007 rate of 1,436,000.
Single-family housing starts in May were at a rate of 674,000; this is 1.0 percent (±9.9%)* below the April figure of 681,000. The May rate for units in buildings with five units or more was 280,000.
This is actually a net positive — given the incredible run up in inventory, the reduction of new home starts is positive for the sector.
Note that the 3.3% monthly drop is less than the estimated relative standard error and is therefore not statistically significant. The year over year drop of 32%, however, is much greater than the estimated error, and therefore is statistically significant.
Bloomberg adds: "Rising foreclosures, higher mortgage rates and declining
property values threaten to keep home sales depressed in coming
months, discouraging builders from starting new projects.
Spending on residential projects may continue to be a drag on
growth the rest of this year as builders try to work off excess
inventories."
Chart courtesy of Barron’s Econoday
>
Sources:
NEW RESIDENTIAL CONSTRUCTION IN MAY 2008
Census Department, June 17, 2008
http://www.census.gov/const/newresconst.pdf
U.S. Housing Starts Drop to Lowest Level in 17 Years
Courtney Schlisserman
Bloomberg, June 17 2008
http://www.bloomberg.com/apps/news?pid=20601087&sid=aVrx2EuK2NzU&
But homes are selling. My relative recently accepted an offer for a home on the market for less than 2 months. Nothing hinky about the deal in any respect. The offer price was a good one. The location of the home was not one of the hyper inflated markets of the housing boom. Too bad the Case Schiller index doesn’t look at markets where people don’t go crazy when money is involved.
“The year over year drop of 32%, however, is much greater than the estimated error, and therefore is statistically significant.”
It’s reassuring to know that a 32% annual change exceeds the standard error. Why, it restores my faith in government statistics!
And I’m betting that this morning’s 7.2% annual rise in headline PPI exceeds the standard error, too — in other words, it’s significantly different than zero. Ah-oo-gah, ah-oo-gah; inflation detected!
Don’t you get a feeling of deja vu, when the forecast for EVERY PPI and CPI report is “core rate up 0.2%” … and nearly every time, THEY HIT IT … just as they did today. Never mind that wholesale prices are billowing higher by over 7%. Core’s up point two, Ford’s in his flivver, and all’s well with the world.
Chronologically I’m a Boomer, but my ‘core age’ is only 35. Welcome to my fantasy world — where inflation is tame, and I have to beat the horny coeds away with a stick.
Amazing how for many builders, the only thing that’ll make them believe it’s time to stop building is a tow truck repo’ing their wife’s car.
Jim H wrote:
Chronologically I’m a Boomer, but my ‘core age’ is only 35. Welcome to my fantasy world — where inflation is tame, and I have to beat the horny coeds away with a stick.
Jim, I have the same problem and have found that ash works better than maple.
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