The Truth About U.S. Housing Numbers 28 comments
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“Purchases of new homes in the U.S. climbed 11% in the month of June”, trumpeted Bloomberg. Sounds good, doesn't it? “Sales increased to a 384,000 annual pace, higher than the forecast of any economist surveyed...” Oooh! Even better. I guess this means that the U.S. housing sector has hit a bottom!
Here's the problem. Exactly ten days ago, this is what Bloomberg (and the other propagandists) reported on U.S. new home starts: “The 3.6% increase brought starts to an annual rate of 582,000, the highest level since November...”
Since none of the media propagandists, none of the economic “experts”, and certainly none of the market sheep can manage to combine these two numbers together, let me do so.
In June, U.S. home-builders started construction on homes at an annual rate of 582,000, while selling homes at an annual rate of only 384,000. That's right, they are building more than 50% more units than they are selling...and this has been happening every month for nearly two years. In fact, for many months, U.S. home-builders were building twice as many units as they were selling (see “A Revealing Look at U.S. Housing Propaganda”).
Here's an arithmetic question. What happens if U.S. home-builders build 50% more units than they sell every month? That's right, they all go bankrupt.
In fact, the more interesting question is this, with U.S. home-builders having built 50% more units than they have sold every month for two years, why aren't inventories showing these sky-high vacancy rates?
Part of the answer comes from an earlier commentary I wrote, “U.S. banks bulldozing NEW homes”. With more vacant homes in the U.S. than anywhere else in the world in history (on a per capita basis), there are millions of homes which could never possibly be occupied – as even if Americans had the money to buy, there simply isn't a large enough population to support all these homes.
The reason for this is that during the U.S. housing bubble (and Wall Street Ponzi-scheme), millions of homes were built purely for real estate speculation. With most of the “speculators” wiped out, this means that all that these millions of excess homes can do is continue to drag prices lower month after month after month.
As I have said for well over a year, the only possible response to this problem is to bulldoze millions of U.S. homes. Clearly, that process has begun. Thus, the apparent discrepancy between the sales/construction numbers and the inventory numbers can partially be explained through simply bulldozing some of these new units – either before or after they are completed.
However, that alone cannot explain the huge discrepancy. Therefore, either the inventory numbers are fraudulent, or the number of “housing starts” reported by U.S. home-builders is totally fraudulent (or both). This begs yet another question. With U.S. home-builders losing vast amounts of money every month, and totally unable to sell as many units as they are building, why haven't most of them gone bankrupt, already?
The answer to that question would appear to be “private prisons”. We have received anecdotal reports from the media for several years now about the explosion in the number of private prisons across America – as well as the human rights abuses connected to them. Thus, the billions of dollars which the federal government is forking-out for construction of private prisons is likely the only thing keeping U.S. “home” builders from mass-bankruptcy.
As I have stated previously, private prisons are the “solution” to a lot of U.S. problems (at least, in the minds of the U.S. government, and the banksters who rule them). As poverty and homelessness in the U.S. soar, crime inevitably climbs with it. Thus, private prisons are a great place to warehouse the poor, because not only does this “keep them out of trouble”, but it also makes them a great source of slave labour for the unregulated sadists who run these institutions.
If any doubt my characterization of U.S. private prisons, I should remind people that the media has already reported that private prisons are the new, favorite investment for both Dick Cheney and Alberto Gonzales.
The bottom-line is that the “residential construction” industry in the U.S. is nothing less than a construction sham. No company could possibly be turning a profit with these fundamentals. Many of the numbers are obviously fraudulent, and with U.S. propagandists refusing to ever post sales and construction numbers side-by-side, it is obvious that the the corporate propaganda-machine is engaged in deliberate deception.
The real “construction industry” in the U.S. is building private prisons, the new “low-cost housing” option for Americans.
Disclosure: I would never hold a position in any U.S. home-builder.
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Until 2 years ago, virtually all finance was based on the assumption (safe until that point in time) that real estate values would continue to rise.
All the hoopla about derivatives and bundled this and traunch that, a bunch of financial snob techno-babble that distracts us from the cold, hard, fundamental point that real estate values had risen with the certaintly of death and taxes for decades, so financial firms all designed their loan terms around the assumpion that real estate values wouldn't reverse. But, they did.
Is that the point?
Or a ledge.
There are thousands of houses also empty with no buyers. The banks are holding on to them until the market changes. But no help for millions being foreclosed on!
You are correct re the " private prisons " the detailed video I saw on Google " FEMA concentration camps " Does show detailed photos of these . they are ALSO equiped with Gas chambers + crematories . The Folks in the video URGE people to Demand from their senators / Congressman answers re them .Folks , you NEED to know about this and Demand answers!
And (as I have written countless times before) the numbers are the same EVERY month.
On Jul 27 03:53 PM HardwoodFlooring wrote:
> Your statistics on new home builds and new home sales are flat-ass
> wrong.
Since you've been reading my work, then you already know that U.S. banks are holding MILLIONS of foreclosed properties off the market. In addition, many of the 20 MILLION empty homes are properties which Americans (and especially retiring baby-boomers) NEED to sell.
Thus, there is so much "shadow inventory" that it will take more than a DECADE for this market to chew through it - IF there are a couple of million excess homes demolished as well.
Obviously, with home sales near all-time record lows, and prices plunging, ONLY the most-desperate Americans are listing their homes on the market.
On Jul 27 03:52 PM HardwoodFlooring wrote:
> Jeff, nothing personal I promise.
>
> Housing inventories in the US on a per-capita basis are the lowest
> they have ever been. I know it's a crazy to think that but it's true.
> During the 70s crisis and the 80s crisis inventories per million
> people topped 8,000 and went near 10,000. Today, by contrast, house
> inventories for sale are around 2,000 homes per million.
>
> Just look at your own country. Canada has 30-40 million people right?
> Vancancies are about 10%.
>
> Then this was just reported:
> Canadian economic data was surprisingly strong, as Canada Mortgage
> and Housing Corp. reported that housing starts jumped by 9.2 percent
> in May to an annualized pace of 128,400 units from a 13-year low
> of 117,600.
>
> Canada has almost an identical profile to the US in regards to inventories,
> vacancies and the rest. (with respect to your inclusion of second
> homes, with which I disagree, you should consider the following-
> does Canada include ever cabin on Lake fo the Woods that is occupied
> by someone from Toronto as a vancancy?)
>
> There is one key componet that you are not adjusting for and that
> is in the US we have been below a million starts for 16 months. We
> have been below 800,000 starts for 7 months. That is absorbing alot
> of supply.
>
> Now, the US has over 300,000,000 people. Builds are still sub 600,000.
>
>
> I guess what I'm trying to say is the right moves have being made
> to reduce supply. In fact, new housing builds have been outstripped
> by sales consistantly.
>
>
>
>
>
there are 18+ Million vacant homes... they continue to build & add new homes every month so the number keeps rising... sooner or later we will reach a breaking point; where NO move up buyers will be found...
I beleive you are dead on in your analysis of housing stats, particularly the "shadow inventory." I am somewhat confused over the injection of "private prisons" as a factor in either keeping homebuilders afloat or this latest despicable social movement generally without the benefit of some specific facts and figures. I realize that acquiring and analyzing such is time-consuming and problematical. However, I foresee lots of honest skepticism on the reliability of this theory. As usual, I appreciate your efforts in keeping us informed of the truth.
Are you saying that the majority of residential contractors are making up their losses by building private prisons? That's a lot of prisons and why don't they just stop building residential?
If properties are getting bulldozed then who is taking the losses? And again, why keep building while you are bulldozing? Who is lending the money for these bad investments and why?
If the job you were doing was no longer profitable/available would you just sit in the dirt and lament? Builders Are Management Companies - Who Does The Skilled Work Is A Variable.
It is Very Unfortunate that the Privatization Of The Prison System has already occurred. Lobbying for stiffer sentencing is already underway and will continue.
This would seem hard to believe from the common conceptualization of "State/Federal Penance" - That Model IS No Longer In Effect In Totality. Rarely do dire things occur quickly - Boiling The Frog is the norm.
I would not have believed that "We" would give our Taxes to save Corruption and initiate "Value As You See Fit Accounting" before it happened.
Common Knowledge Is Never Where Discoveries Are Made.
Those Who Only Look One Direction To Asses The Weather Will Be Taken By The Storm.
It is difficult to filter propaganda and paranoia for reality - You do not have to run to the far reaches of sanity to postulate "Questions".
The More You Know The Less Certain You Will Become
Safety Is A Function Of Awareness.
On Jul 28 10:07 AM Mark123 wrote:
> Jeff.....Similar question.... What does a wood frame home builder
> corporation know about concrete block construction???.... The basic
> difference in construction between house & prison is like night
> & day....
The larger U.S. home-builders do more than just residential construction and all they would really require to branch into prisons is to bring in some engineering expertise.
Thus, if many of the new "housing units" being reported in U.S. statistics were (in fact) prison cells, it would solve that numerical contradiction AND explain why we haven't already seen more bankruptcies in this sector.
U.S. prisons have HUGE over-crowding problems, with California having one of the worst problems AND vowing to reduce (government) prison facilities. PRIVATE (federally-sponsored) private prisons solve that problem as well.
Finally, given the way the fascist, "Homeland Security" Department has been able to suppress all kinds of informaton on the basis of "national security", all they have to do is tell the contractors that these facilities are "terrorist detention facilities" and suddenly it becomes simple to call prison cells "housing units" in official statistics.
On Jul 28 11:27 AM User 462251 wrote:
> Jeff. I enjoy your articles. A few questions though.
>
> Are you saying that the majority of residential contractors are making
> up their losses by building private prisons? That's a lot of prisons
> and why don't they just stop building residential?
>
> If properties are getting bulldozed then who is taking the losses?
> And again, why keep building while you are bulldozing? Who is lending
> the money for these bad investments and why?
"Monthly housing starts (even single family starts) cannot be compared directly to new home sales, because the monthly housing starts report from the Census Bureau includes apartments, owner built units and condos that are not included in the new home sales report.
However it is possible to compare "Single Family Starts, Built for Sale" to New Home sales on a quarterly basis. The quarterly report shows that there were 52,000 single family starts, built for sale, in Q1 2009 and that is less than the 87,000 new homes sold for the same period. This data is Not Seasonally Adjusted (NSA). This suggests homebuilders are selling more homes than they are starting."
OK that was in Q1 thru may. Now, please go to the and read the statistics and look at the graphs from Calculated Risk who you called "intelligent" in an earlier post.
Also, why don't you do an analysis of the Canadian market. If the US is so bad it seems the stats(vacancies/new homes/inventories etc) look worse in Canada- who supposedly avioded this mess.
I suspect this sort of crime is rampant throughout the country now, especially where there are lots of empty cells in private prisons, but unfortunately today's journalists don't seem interested in such things.
On Jul 27 07:49 PM Rolandownthehill wrote:
> I for one am appalled! I am getting foreclosed on even thou I am
> employed. Because the bankers are just to greedy. An then I have
> to read this? Unbelievable!
> There are thousands of houses also empty with no buyers. The banks
> are holding on to them until the market changes. But no help for
> millions being foreclosed on!
I don't claim to be an expert but here is what I have read:
Canada has the same fundamentals as the US, however in Canada some differences have helped keep the market strong for the short term.
1- the vast majority of mortgages are insured by the Federal Government, who has on risk a value higher than Canada's total debt. This allows the banks to continue lending and offload the risk of default to the Federal Government.
2- in order to walk away from a house in Canada, you must file for bankruptcy, or pay the difference between what the house sold for vs what is owed.
3- as interest rates have dropped dramatically, when you sell your house you owe the difference between total interest payments you owed on the remaining term, and what is available today. I have seen this to be 5% of the total mortgage.
Therefore, many Canadian homes have been taken off the market, meaning a lack of inventory that caused a rise in prices. Also, with interest rates at all time lows, Canadians who were priced out of the market can now afford the monthly payment.
I don't think we can avoid the mess, we have just delayed it and it is only a matter of time- when interest rates go up.
On Jul 28 03:35 PM HardwoodFlooring wrote:
> Jeff, Did you go to the Calculated Risk web site and see the information?
>
>
> "Monthly housing starts (even single family starts) cannot be compared
> directly to new home sales, because the monthly housing starts report
> from the Census Bureau includes apartments, owner built units and
> condos that are not included in the new home sales report.
>
> However it is possible to compare "Single Family Starts, Built for
> Sale" to New Home sales on a quarterly basis. The quarterly report
> shows that there were 52,000 single family starts, built for sale,
> in Q1 2009 and that is less than the 87,000 new homes sold for the
> same period. This data is Not Seasonally Adjusted (seekingalpha.com/symbo...).
> This suggests homebuilders are selling more homes than they are starting."
>
>
> OK that was in Q1 thru may. Now, please go to the and read the statistics
> and look at the graphs from Calculated Risk who you called "intelligent"
> in an earlier post.
>
> Also, why don't you do an analysis of the Canadian market. If the
> US is so bad it seems the stats(vacancies/new homes/inventories etc)
> look worse in Canada- who supposedly avioded this mess.
On Jul 27 07:49 PM Rolandownthehill wrote:
> I for one am appalled! I am getting foreclosed on even thou I am
> employed. Because the bankers are just to greedy. An then I have
> to read this? Unbelievable!
> There are thousands of houses also empty with no buyers. The banks
> are holding on to them until the market changes. But no help for
> millions being foreclosed on!