The Housing Market Goes South

Analyzing the top news stories across the web
July 17 2014 2:51 PM

The Housing Market Goes South

Was6869400
Not too much of this going on in Alabama

Photo by Paul J. Richards/AFP/GettyImages

This post originally appeared in Business Insider.

On Thursday morning we saw that housing starts unexpectedly plunged 9.3 percent to an annualized rate of 893,000. On the face of it, the report was ugly, considering all the talk about the recent housing snapback. 

Advertisement

It's important to note that the miss was entirely due to one region: the South. Housing starts plunged 29.6 percent in the South, driven by weakness in single-family units. "All the hit is in the south, where starts plunged by 29.6 percent, the biggest ever monthly drop, despite gains in each other region," wrote Ian Shepherdson at Pantheon Macroeconomics.

Starts were actually up in the rest of the country. In the Northeast, housing starts were up 14.1 percent, driven mostly by multifamily starts. In the Midwest they were up 28 percent, and in the West they were up 2.6 percent. 

It wasn't immediately clear what was behind the sudden plunge in the South. "But homebuilders are being constrained by a shortage of labour and lots," Paul Diggle at Capital Economics. "Labour shortages are particularly prevalent in the carpentry and framing trades required at the start of the construction process. And shortages of lots mean that land prices are rising more quickly than the historical relationship with house prices would suggest." While the headline was weak, Eric Green at TD Securities wrote that "the report is exceptionally uneven and on balance is not an indication of a significant turn in housing construction."

During her semiannual monetary policy report this week, Federal Reserve Board Chair Janet Yellen said the housing sector hadn't shown much progress. "While this sector has recovered notably from its earlier trough, housing activity leveled off in the wake of last year's increase in mortgage rates, and readings this year have, overall, continued to be disappointing," she said.

While this report has been disappointing, economists do point out that single-family details were actually better than multifamily starts. And Shepherdson argues that this correction was expected after "May starts overshot the pace  implied by building permits."

"It's probably just noise," Shepherdson told Business Insider in an email. "Single-family permits are the best guide to activity and they rose 2.6 percent in May and have recovered most of the winter hit.  I don’t expect significant further gains, but equally I’m not looking for further declines after the terrible-looking June headlines."

Bottomline: The report is ugly no doubt, but we'd urge caution with interpreting these volatile numbers.

Michael McDonough, global head of economics at Bloomberg, tweeted this chart that shows a breakdown of housing starts by region.

Mamta Badkar is a reporter at Business Insider.

TODAY IN SLATE

Politics

Don’t Worry, Obama Isn’t Sending U.S. Troops to Fight ISIS

But the next president might. 

The Extraordinary Amicus Brief That Attempts to Explain the Wu-Tang Clan to the Supreme Court Justices

Amazon Is Officially a Gadget Company. Here Are Its Six New Devices.

The Human Need to Find Connections in Everything

It’s the source of creativity and delusions. It can harm us more than it helps us.

How Much Should You Loathe NFL Commissioner Roger Goodell?

Here are the facts.

Altered State

The Plight of the Pre-Legalization Marijuana Offender

What should happen to weed users and dealers busted before the stuff was legal?

Surprise! The Women Hired to Fix the NFL Think the NFL Is Just Great.

You Shouldn’t Spank Anyone but Your Consensual Sex Partner

Moneybox
Sept. 17 2014 5:10 PM The Most Awkward Scenario in Which a Man Can Hold a Door for a Woman
  News & Politics
Altered State
Sept. 17 2014 11:51 PM The Plight of the Pre-Legalization Marijuana Offender What should happen to weed users and dealers busted before the stuff was legal?
  Business
Business Insider
Sept. 17 2014 1:36 PM Nate Silver Versus Princeton Professor: Who Has the Right Models?
  Life
Dear Prudence
Sept. 18 2014 6:00 AM All Shook Up My 11-year-old has been exploring herself with my “back massager.” Should I stop her?
  Double X
The XX Factor
Sept. 17 2014 6:14 PM Today in Gender Gaps: Biking
  Slate Plus
Slate Fare
Sept. 17 2014 9:37 AM Is Slate Too Liberal?  A members-only open thread.
  Arts
Brow Beat
Sept. 17 2014 8:25 PM A New Song and Music Video From Angel Olsen, Indie’s Next Big Thing
  Technology
Future Tense
Sept. 17 2014 9:00 PM Amazon Is Now a Gadget Company
  Health & Science
Bad Astronomy
Sept. 18 2014 7:30 AM Red and Green Ghosts Haunt the Stormy Night
  Sports
Sports Nut
Sept. 17 2014 3:51 PM NFL Jerk Watch: Roger Goodell How much should you loathe the pro football commissioner?