The Census Bureau reported permits and starts numbers for May which were less than impressive. While permits were up from revised April figures, they were still lower than levels seen last year. Single-family permits (one unit structures) were down 3.3 percent from the same time a year ago. The sluggish numbers for housing permits and starts in May is a bit surprising to some of the experts considering the recent plunge in mortgage interest rates. Unfortunately there is more to the demand for new homes than just ultra low interest rates.
Housing starts in May were down 0.9 percent from revised April figures, with single-family starts registering a 12.5 percent decline from May of 2018. This reflects a lack of homebuilder confidence in the economy despite the advertised homebuilder optimism built into NAHB’s housing market index. That index actually declined from last month, dropping two points to 64 in June.
Housing completions for one-unit structures posted a modest 1.6 percent increase from May of last year. Even with mortgage rates well below 4 percent builders are in no hurry to put spec inventory homes on the ground. They seem to be content to work through their existing pipeline amid a large degree of uncertainty in the economy. The DFW area is currently sitting on 4.5 months of supply for new construction, and 4.2 months of supply for new single-family homes.
If the “experts” wanted to get a better understanding of why the latest recovery has been so weak, they could look a the Federal Reserve’s recent Distributive Financial Accounts data. It contains some eye-opening numbers on wealth inequality in the United States. Since 1989 the top one percent has gained $21 trillion in wealth, while the bottom half of the population has lost $900 billion. Trickle-down monetary and fiscal policies continue to weigh on the U.S. housing market.