Wednesday, September 16, 2015

More good housing news

Given the abundance of bad news these days (Fed "tightening," Chinese slowdown, global growth slowdown, xenophobia, Iran going nuclear, Brazil meltdown, sluggish US growth, stock market corrections, etc.) good news doesn't get the press it deserves. So here's a modest contribution:

Housing starts are up 25% in the past year and 120% in the past four years, and look to have plenty of upside potential given household formation growth and scrappage. Builders' sentiment hasn't been this strong in almost 10 years. Together, the two strongly suggest further improvement in residential construction for the next year or so, and they further suggest that households are regaining confidence in the future of homeownership. Confidence, as I've argued for years, has been the thing most lacking in the current business cycle recovery, so this is good news.

As a corollary, an index of the stocks of 18 leading home builders has more than tripled since early 2009, and is very close to an 8-year high. Yet prices are still 40% below their "bubble" high of 10 years ago: lots of improvement, but still lots of room for future growth.

UPDATE (Sep 17): August housing starts fell, coming in a bit lower than expectations (1126K vs. 1160K), and prior months were revised downwards a bit. This runs counter to the gist of this post, but does it change the big picture? Hardly. This series is notoriously volatile on a month-to-month basis. Starts likely remain in an uptrend, and the rise in builders' sentiment supports the outlook for continued gains in the months to come. Here's the updated chart, which you can compare with yesterday's version above:


Benjamin Cole said...

There is good news out there; For example rapid improvements in battery technology may mean within five years or so a battery car will be a better choice for the urban consumer than ICEs. I'm not talking about a do-goody government incentives-- I mean because battery cars will be the better option.

This should lead to cleaner and more prosperous cities. The money spent importing gasoline to urban areas will instead be spent inside urban areas on other goods and services.

Housing: almost all cities zone residential land thus limiting supply. This leads to inflation more than any Fed policies.

It is too bad that the US Supreme Court has upheld the power of government to zone private land.

Benjamin Cole said...

A rant to no one in particular: Jeb Bush may not be the GOP frontrunner, but he is the GOP escutcheon-bearer, if you will.

So in last night's debate, Bush brags that he prevented Trump from building a casino in Florida.

No one in the GOP seems appalled by this. One, that a state (evidently in the form of Jeb Bush) tells citizens whether or not they can attend a casino, and two, that Bush evidently actively prevented business development in Florida--and brags about it!

Trump was little better in the debate, only suggesting he should have paid a bigger bribe to get his casino---not that, "What the heck is a government doing preventing hotels and casinos from being built on private property?"

Trump even could have even said, "Good; You stopped business development and stopped people from employment. Excellent.'

Egads. And Trump is the best of the lot, from what I can tell.

Really, can we get Scott Grannis to run for President?

Hans said...

"Really, can we get Scott Grannis to run for President?"

Ben Jamin, another earmark from your candidate "xenophobia." The Uber Court has
become little more than a tool of WDC..In fact, if one examine the history of
the court system and their rulings since the 1900, there has been a decisive
drift in support of the establishment. fiats and the decline of freedoms.

Houston, at least a decade ago, had no zoning unlike most cities, wherein the
governmental units dictate the every use of land and it's development...

There is a nexus between "managed" growth by governmental units and soaring
real estate prices..If this is indeed factual, it presents another argument as
to why statist policies interfere with the market mechanizes and thus driving
prices artificially high..(mandates never lower prices, unless they are price

This has had serve consequences for the lower and middle class, as they are
priced out of the market..But for the statist, this brings joy, as it offers
another (among thousands) program to address the shortcomings they themselves created.

Another prime example would be auto sales..It is estimated, that today's
average cost vehicle contains 20% mandated costs..This would represent about
$6,ooo in additional expenses.

Mr Grannis is right to suggest that housing is still below the all time peak
but is that an accurate description of reality..? Was not the housing market
acutely distorted beyond approach decades before the grand collapse?

Ben Jamin, you very clairvoyant in linking zoning mandates and inflation..
Many now can not afford real estate and do not know why.

Grechster said...

Just about anybody who participates in this blog would have my vote. (Heck, a random guy plucked off the street corner would have a better than even odds chance of getting my vote.) But as always, since I live in Massachusetts, my presidential vote never matters (which makes it easier to vote Libertarian). Still, I would love to see Scott or Benjamin make a go of it. At a minimum it may start some badly needed conversations. Oh geez, I didn't just use that phrase, did I?

steve said...

scott, I'm sure you're listening to chair yellen as i write this. what say you?

Scott Grannis said...

The Fed is erring on the side of caution. Based on the market's reaction to the news that the Fed is going to wait some more before liftoff, the uncertainty over the impact of a rate hike was depressing confidence. That uncertainty has now been reduced; the vix is down and equity prices are up. While I would have voted to increase rates, the FOMC's decision to hold off is not a terrible one. Economic and financial fundamentals continue to be healthy.

Benjamin Cole said...

Hans-- most cities even zone land commercial or retail.

Imagine if I want to sell to you a widget in the City of San Clemente. I can only do so on land that is zoned retail.

Okay, so I have to rent or buy retail space before I can sell you a widget.

Gee, what do you suppose that does to retail prices?

Hans said...
This comment has been removed by the author.
Hans said...

Ben Jamin, I suspect driving up costs.

As a traveling salesman, I encounter not only zoning regulations but
also permits, licences and bonding.

Iowa, is an example of this..Most if not all villages require the pulling
of a permit and on top of that requires additional licence and naturally
fees from the Secretary of State.

In my home town, the planning department (the permission commission) requires
ALL DETAILS, of each development and their final approval..I saw the city
council in action, when Whole Foods decided to built a market in our "community."

The demands made upon Whole Food and their developer was unbelievable.

In the three cities around my town, all of them require a retail store to
do business...You are not allowed to set up a temporary business, such as
a spring flower stand, which we had wanted to..

If a vendor or business is not contributing directly to their treasury, you are
not wanted..This is complete and total control of commerce and provides protection
and a barrier for established home town business..

In the main, this is nothing less than a means to reduce competition for local business.

This is not a theory, but reality when dealing with varies governmental units.