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Building permits for single family homes signal a pickup in housing to come

  • Despite the 2.2% decline in July construction starts on single-family homes yesterday, some analysts contend that a pick-up is in the works for later this year. Why? - Building permits.
  • The fact is that building permits issued for single-family homes are up 25.3% in the first seven months of this year, while, home starts are up only 20.1% in that span.
  • As builders tend to start construction soon after receiving permits, it stands to reason that the growth in home starts will close the gap with permit growth.
  • "The fact is that starts don't lag that far typically from permits," says Zelman & Associates Ivy Zelman. "So we think there should be a catch up."
Comments (14)
  • Bubble. Did I spell that correctly?
    17 Aug 2013, 11:12 AM Reply Like
  • Wyo:


    Home prices are up 12.2% YOY. Why is that? One of the fundamental reasons has been that many markets have extremely low inventories, not excesses.


    It seems in the housing space one cannot win against the circular bear argument. If prices are zooming higher, it's a "bubble." If builders expand construction to increase supply to meet the demand that's driving up prices, it's also a "bubble." Only falling prices and unit volumes aren't a "bubble," apparently.
    17 Aug 2013, 11:50 AM Reply Like
  • Tack
    Combine the housing situation with the UE real numbers of ca. 15 to 20%, the number of people on food stamps hitting almost 50 million, disposable income actually falling, and all other economic numbers except for the stock market, and , yes, housing is in a bubble.
    17 Aug 2013, 11:58 AM Reply Like
  • wyo:


    Those that have used these arguments the whole way that the stock market and housing have recovered have sabotaged themselves. Economies are driven by the actions of those with wealth and jobs, not those on the margin.


    The supposed "real" numbers you cite have been promoted by those with bearish agendas, so if the numbers sound bigger and scarier, all the better. In fact, because of expanding too-attractive subsidies for being "unemployed," as well as disincentives for employers to have workers on official payrolls, it stands to reason that there's a swelling off-the-radar economy. That's one reason why retail sales, auto sales, home sales, etc. all seem to defy the "official" statistics.


    Housing remains at very affordable levels, even after the rate spikes. Demand is exceeding supply. Purchases are being made with cash (40%) and much tougher credit qualifications and downpayments. This is not the stuff of bubbles.
    17 Aug 2013, 12:11 PM Reply Like
  • Tack
    Your complete optimism remains as always unshaken no matter what the facts indicate.
    Stay well.
    17 Aug 2013, 12:57 PM Reply Like
  • wyo


    It doesn't have anything to so with "optimism" or "pessimism." I find both of those emotions rather less than useful in making investments. The data (affordability, rates, how homes are bought and financed, inventory, building levels, etc.) tell me that we're not remotely close to any "bubble" in housing. That doesn't mean we go relentlessly straight up, but those looking for some new imminent meltdown, accompanied by a new wave of foreclosures, are simply engaging in wishful thinking.
    17 Aug 2013, 01:11 PM Reply Like
  • Tack
    Or, just possibly, you are simply engaging in wishful thinking that it will not occur.
    Time will tell.
    Enjoy the weekend.
    17 Aug 2013, 02:44 PM Reply Like
  • I think I split the difference between the two of you. The numbers do indicate other sources of funding and investor buying. Long term employment needs to support housing levels in regions, unless the population shifts more towards a rentier class, which is possible. I think a better term is "sustainable". I don't think we will see the low housing prices of 2008 and 2009 anytime soon, but it is not unreasonable to expect a pullback in some regions. Investors placing bets on housing are treating it just like any other asset class, which means price volatility should be expected.
    17 Aug 2013, 02:57 PM Reply Like
  • Unemployment compensation is not a hand-out. It is an insurance scheme run by states. The states are not losing money making unemployment payouts. Even at 10% unemployment you still have 9 out of 10 people, and the companies for whom they work, paying unemployment insurance to the states. Obviously the states would rather hold onto that money, so it is popular to demonize the unemployed. Ideally this entire system should be privatized, but it is a large source of funding for states.
    17 Aug 2013, 03:00 PM Reply Like
  • "Economies are driven by the actions of those with wealth and jobs, not those on the margin."


    This might have been true in the in the early 1900s, but you might be unaware of how much money is being doled out in welfare, disability, food stamps and other forms of government handouts.


    There's roughly $140 billion spent on welfare payouts, and this doesn't even include the money handed out to the15% of the population who receive food stamps.


    Industries that prosper from the growing welfare state are a huge part of the economy. Walmart is the country's largest private employer. Were it not for the huge number of customers using welfare and food stamps, it would be a much smaller company.


    Food stamps have become so common that I've seen people throw down stamps at Whole Foods for grass-feed beef and $20/pound unpasteurized Stilton cheese.
    18 Aug 2013, 01:04 AM Reply Like
  • "Purchases are being made with cash (40%)"


    Goldman claims cash buyers are 60% of the market in 2013. There's a rental market boom and a speculator revival, not a noteworthy owner-occupied housing "recovery".


    Some cash buyers are not Wall Streeters. Some are foreigners. Years ago after the California bubble topped out, many California speculators shifted their home-buying attention to Arizona, Nevada, and a few other states. Ironically, speculators from China, Russia, Brazil, and Canada have shifted to America now that their bubbles are topping out.


    Global real estate speculation is like a cross between a ponzi scheme and a game of musical chairs. The ramifications of the non-U.S. bubbles are largely being ignored just like the U.S. bubble was ignored in 2002-2006.
    18 Aug 2013, 02:15 AM Reply Like
  • P.S. Foreign speculators have started to curtail purchases in the United States in the last year. Which country will be the next haven for foreign speculators? Or is this the beginning of the end of the international RE speculation bubble? When California speculators stopped buying in Vegas, it was not long before the US bubble popped.
    18 Aug 2013, 02:42 AM Reply Like
  • Federal workers happily encourage the use of the food stamp (SNAP) program with handy tips like the following excerpt from the USDA food stamp web page:


    "[The food stamp card] works like the bank debit card that other people use to pay for their groceries in increasing numbers of stores. The cost of the groceries bought is deducted from the household's account automatically. A major advantage of this method is that the use of food coupons is not conspicuous. Most other people in line will not notice that the person checking out is paying with food coupons. We have found that SNAP households like this feature, because it reduces the stigma many people feel in using SNAP benefits.


    A second advantage is that the household no longer needs to go anywhere to pick up benefits each month. Benefits are automatically loaded into the household's account each month on the designated date. We have found that households especially enjoy this feature."


    The punk band, Circle Jerks, were ahead of their time when they wrote the following song used in Repo Man (link to YouTube):

    18 Aug 2013, 12:38 PM Reply Like
  • Vibrant new home building going on now in North Texas. The most I have seen since 2005-6. Long TOL.
    17 Aug 2013, 04:27 PM Reply Like
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