Not too Hot, Not too Cold. Better than where we were during

October for 2008 through 2017.

There have been numerous articles elsewhere regarding a "slowing housing market." The problem is that most articles are written using the seasonally adjusted data, at best, or the verbiage of the actually reports, at the worst, regarding new home construction, new home sales, or existing home sales. This year we have been ahead of where we were during 2016 and 2017 every month since January. There has been some weakness in existing home sales this year, in part, because of a lack of inventory that has been present since December of 2015. This column produced a forecast article regarding the new home construction data, the existing home sales data, and the new home sales data titled "October Real Estate Forecast: Banging Ahead." The data was examined by looking at same month growth, month to month changes, current year statistics, and rolling year statistics for the past twelve months. The projections for new construction were:

  • New Single Family Starts over 79,000 and under 83,000
  • Units under construction of 1.154 million to 1.163 million units
  • Completions of at least 112,000 and up to 123,000

This data is important because new homes "require" new appliances, new electronics, new home furniture and furnishings, new Home and Garden Equipment, and often a new car. New construction helps build the inventory and inventory is required to make sales. The Great Recession was a Housing Recession first, a jobs recession second, and a retail sales recession third. The Retail Ice Age has been replaced with the Retail Renaissance. The "Jobs Iceberg" has melted and we are now climbing the Jobs Mountain. What was recorded, non-seasonally adjusted, and what was reported, seasonally adjusted in the October New Construction Report?

Annually Adjusted data can be misleading.October 2017 New Construction
  • Single Family Starts were projected for October 2017 at  877,000 units, up from October 2016 when it was 871,000 units
  • Units under Construction were reported at 1.096 million, up from 1.056 million units
  • Completions were projected at 1.232 million, up from 1.067 million, with single family completions up from 755,000 to 793,000 units, seasonally adjusted.

The data that is reported in the media is the seasonally adjusted data or the annual rate of starts, completions, sales, whatever the metric is being reported. Seasonal factors changes month to month and year to year. The only "fair" analysis is the non-seasonally adjusted data.

New Home Starts missed slightly with 74,600 Single Family Starts. The starts data were revised for August to 80,800 and 75,300 for September. Starts tend to slow as the weather turns cold, and then completions and under constructions rise so that there is housing stock for sale after the first of the year. This miss is still better than what we had during October of 2008 through October 2016. This may just be a blip.

New Home Starts are on track for 946,000 units by the end of the year. This is good news because we "only" had 848,9000 starts during 2017 and 781,500 units during all of 2016.  Put another way - we have more starts after 10 months this year than we had during the entire 2016 year starts.

Units under Construction broke through the 1.15 million unit level. The new home sales market has been restricted by the amount of inventory. It is "impossible" to sell what isn't built. People can build custom homes. It is a challenge. It is "hurry up and wait." I would rather pick a built house and choose the cabinets, counters, tile and carpet. We may see a slowing in the growth rate of units under construction during the next few months. "Trees don't grow to the sky." Actually, they do grow to the sky. They just don't grow through the atmosphere.

Completions of units dropped below 100,000 units. This is a slight drop from October 2017 and is still better than October 2008-2016. The new home market is still in recovery mode, it is not in expansion mode. It may not be advantageous to return to 2004, 2005, or 2006 levels of starts and completions. The general consensus was that we were "overbuilt" prior to the Great Recession.

New home completions , total units, are on track for 1.19 million units. This is up substantially from the 1.157 million units completed during 2017 and the 1.059 million units completed during 2016.

The August and September data were generally revised higher than last reported. Starts and Completions were revised higher from the August Preliminary values. Under Construction was revised slightly lower. The Advance September data was revised higher for Starts and Under Construction. Completions were revised lower.

Seasonally adjusted data was revised. The Seasonally Adjusted total starts data for October 2017 was revised from 1.290 million to 1.265 million units. Under Construction was revised from 1.096 million to 1.097 million. Completions were revised from 1.232 million to 1.118 million. The Seasonally adjusted data this October stands at 1.228M total starts, 1.137 million units under construction, and 1.111 million completions. "None" of this data makes sense. This column will have a better handle on the future for the 2019 data after the first three months of 2019.

The Rolling year data is still good. Total starts are at 1.261 million, up from 1.198M last October, Single Family Starts are up to 913,000 from last October's 838,000. Total completions are up 4.88% from 1.148 million to 1.201M. Momentum is still heading higher. (Graphics here.)

Net-Net: We have had more Starts, units under Construction, and Completions through October 2018 than we had during we had through October 2008, 2009, 2010, all the way through October 2017. This should spur more retail sales and may shake loose some existing home inventory.

It's the economy.

 Reclaiming Common Sense