New Home Construction, New Home Sales, and Existing Home Sales are Economic Multipliers. All Could see Improvement June to June


New Home construction is needed to generate new home sales. June new home starts were expected to be comparable to, or better than June of 2017 and 2018. Units under Construction were expected to break through 1.14M units. Completions were expected to outpace 2018 levels. There are many ways to examine the data. We can look at month to moth changes, same month changes, and cumulative changes


June Single Family starts dropped, non-seasonally adjusted, from June 2018. The trend has been for starts t slow this year while completions continue to grow from year to year. The 81,600 June starts was an improvement from the housing recession when we saw fewer than 75,000 June single family starts between June 2008 and June 2016.  The twelve month histogram shows that we started off with a strong level of Starts during January and that Starts can peak during April, May, or June, before tapering through the end of the year.


Units Under Construction broke through 1.14 million units. It is not possible to sell homes if they are not started, then under construction, then completed. Units under construction ht generation lows during the Housing Recession. There was a spate of activity, during 2014, 2015, and 2016 whereby under construction inventory blossomed. The rate of growth has slowed, in an apparent attempt to avoid building more units than are needed. It should be no surprise that starts have been slowing and completions have been growing this year, in an apparent attempt to maintain a steady level of 1.13 to 1.14 million units. Total units under completion rose June to June while 1-unit buildings dropped from 531,200 to 530,400. This is negligible.


Completions rose month to month and edged lower June to June. The June NSA Completions data came in at 103,300 total units, up from May (102,800) and down from last June (108,600.) Single family units were up May to June from 75,100 to 76,000 and also up from last June (75,600.) The overall picture is that we are ahead of pace, year to date, with 2008-2018. Have we seen peak completions for this clendar year, or could we peak during August as we did during 2018, or will we peak during December as we did during 2017?


The Great Recession was Four Recessions in one. We had housing sales peak during 2005 with average sales prices peaking during 2006. We had peak employment, and peak jobs, during July 2007.s  The retail sales data was the last to be impacted and the first to recover. The three recessions "created" the GDP recession. We have a record level of Jobs and workers, non-seasonally adjusted. These workers are earning record June Weekly wages. People need two years of continuous employment, preferably  permanent full-time positions, not seasonal positions, to qualify for mortgages. People have to know that they can sell their home for more than what they paid for it and they have to know that they can afford to buy their next homes.


We are not in a recession. "All recessions" are jobs recessions. Unemployment is still trending lower year of year. Jobs are still rising year over year. We still have record levels of Job Openings. Inflation is low. Participation is improving. Retail sales are still on track for another record year. The inverted yield curve is being created by negative long-term bond rates in the European Union. If you can invest in the US and get positive yields versus the EU and negative yields, which would you do? AS investors buy more bonds the demand drives prices up and yields down.


Are you waiting for a rate cut? We were told to anticipate three rate hies during 2018 and two during 2019. Then we were told to expect four and one. Then some mental midget proposed a possible fifth rate hike during the government shutdown. The current discussion is a single rate cut either during July or September. Now another mental giant is saying that we should anticipate twp, three, four, or five rate cuts during the next two years. No. We should get one cut, possibly this month, to calm markets and to "dis-invert" the yield. We might then get one more rate HIKE by the end of the year in order o have some room to cut if the economy slows. The Federal Reserve is the US Federal Reserve, not the International Monetary Fund. We can only work with what is happening in the US economy. We must lead by example. If you are waiting to ht a lower mortgage rate, don't. The interest rates were at 10% during 1990 and dropped roughly 1% a year until 1995. When interest rates dropped below 7% people were gobsmacked. It was cheap money at 6%. It was a dream come true at 5%. Eventually interest rates will hit 5% again. Contact your REALTOR and your loan officer.


All real estate is local. This data discussed in this column has been non-seasonally adjusted national data. The headline numbers will be seasonally adjusted. The things that determine sales prices are location, condition, amenities, and the motivation of the buyers and the sellers. Prices are impacted by the state, county or parish, municipality, school district, neighborhood or condominium association, and style of home. Some years neighborhoods or price ranges are hot and then cold the following year. Sometimes there is an under-supply during June and an oversupply during May.


The new home construction data varies from month to month and year to year based on the weather, the real estate market for existing homes, and the jobs market. New home construction data is very important for the Gross Domestic Product (GDP) because Gross Private Domestic Investment is one of the four main components of GDP. Personal Consumption Expenditures (PCE) is also important, and the seasonally adjusted MARTS retail data came in stronger than most analysts had expected.  We know that we are spending more at the Government Consumption Expenditures level.The only other component that needs to be addressed is the Net Exports data. The point of this discussion is to say that while the month to month data was not as good as it could have been, the year to date data is good.


Next week we will receive the New Home sales data and the existing home sales data. June is a huge month for existing home sales. Real estate sales, and especially existing hoe sales, can drive retail sales of new electronic and Appliance Sales (EAS,) new Building Material and Garden Equipment Sales (BMGE,) and Furniture and furnishing Sales.



It's the Economy.

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