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Epic miss on housing starts is a wake up call

This was only unexpected if bought the mainstream spin

June 17, 2014

May’s housing start numbers from the U.S. Census Bureau look bad at first blush.

When you dig deeper, it’s worse.

Housing starts and permits missed expectations, and they fell the most since January, back when a few weeks of winter weather was blamed for how bad the numbers were then.

Analysts predicted 1.03 million annual housing starts.

Investors are pulling out of multifamily and homebuilders aren’t keen about betting on single-family taking off.  Consequently, declines in both single-family and multifamily construction led to 1.001 million starts instead.

Click below to see the chart.

The housing permits front looks even grimmer. Analysts expected 1.05 million, but what the industry delivered was 991,000, a miss of epic proportions.

Click below to see the chart.

Lindsey Piegza, chief economist with Sterne Agee, said that, “…from a historical perspective, starts remain tepid with a 1M unit level marking the trough in activity in previous recessions. 

“Going forward, a stronger job market and lower housing costs will grow demand, particularly among the younger generations. For now, housing remains positive but uneven,” she said.

Breaking down by permit and start type – multifamily is still where most are putting their money. It’s driving the bulk of activity.

Single-family starts dropped 5.9% after a 4.6% rise.

But it was just as bad on the multifamily front, as starts declined 7.6%, following a 29.2% spike in April.

Building permits followed a similar pattern.

Permits fell 6.4% after a 5.9% rise in April.

This is more than just “disappointing.”

(And the next economist or analyst who says it’s “surprising” should be asked what he does all day instead of research.)

This is as clear an indicator as there has been that the housing industry is stalling out. All the optimistic spin in the world can’t change that.

Now many of the same see-no-bad-news pundits that spent the last six months telling the industry that the slowdown was winter weather and that a breakout of pent-up demand was just about to happen – wait for it, wait for it, almost there….wait...wait…Squirrel! – are finally admitting there’s a problem.

(You know who you are. I could – but I won’t – post a few dozen links to the Pollyanna forecasts, but I won’t because I’m good people. But I'm watching.)

Admitting there’s a problem in the industry is a step in the right direction.

Come next month, there’s not going to be any weather to blame a slowdown on. 

Maybe the FIFA effect? 

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