Reclaiming Common Sense

Mixed News in the New Construction Data may be good news when New Construction Sales data is released

This column produced an article titled "How High Will Real Estate Jump This March" in which it was projected that starts could come in between 65,000 and 84,000 units, anticipating roughly 75,000 units, Under Construction was expected be between 1.129 million and 1.14 million, and Completions were expected between 98,000 units and 105,000 units. The data is showing this  push and pull of completion ups, starts down, starts down completions up.

The Starts data came in at the low end of expectations at 65,500. It was though that the lowest that we should have expected the data was 67,900, based on the annual growth from March to March.  This column has proposed that the slowdown in Starts has been due to a slow down in the loan approval process for builders or buyers who are hiring builders. It is also possible that there is still a shortage of construction workers, as we are not yet back to pre-recession levels of Construction Sector workers. This number was considerably lower than the anticipated 74,500.

Units under construction came in sightly lower than anticipated at 1.11 million units. Units under construction have been growing at a rapid pace since 2013.  Normally we maintain an inventory of units under construction less than 1 million units. The level of units under construction may have been rising because completions were not keeping pace with the level of starts that we had been experiencing.

The Completions level were the best for March since 2007. The 103,100 completions were perfectly within the expectations of 98,000 to 105,000 completions.  There is still plenty of room to run prior to breaching the 120,000 or 140,000 levels that we saw prior to the Housing Recession.

The seasonally adjusted starts data was weak everywhere except for the "South" 1-unit starts which were up from 440,000 to 457,000 units this March. One family units under construction were up from a seasonally adjusted 508,000 units last March to 531,000 this March.  Single family units under construction showed strength in the Northeast, up from 53,000 to 65,000, March to March, and the South, up from 231,000 to 251,000. Seasonally adjusted completions were up in both the Midwest and the South. The Midwest reported an increase from 154,000 units last March to 184,000 units this March, with a boost in single family units from 108,000 to 137,000 units. Similar data was found in the South where total units jumped from 595,000 units to 682,000 units, and from 467,000 single family units to 492,000 units.

Just because the markets are closed for Good Friday does not mean that the Government wasn't gong to publish the March New Construction data.  This data continues to show that the new home construction market is making steady gains in starts, units under construction , and completions, although not often all during the same month. This could mean that we will see a surge in new construction sales through the Summer and into the Fall. It may be years before we return to the heyday of the 2005 and 2006 markets. We may not want to over-inflate this balloon as we did during that two year time-frame.

It's the Economy.