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Housing Starts Surge Due To Rental Housing Construction, Permits Miss Even With Seasonal Distortion

Tyler Durden's picture


On the surface, today's Housing Data was good. Yes, there was a miss in the housing permits number, which declined from a downward revised 939K to 902K, on expectations of a strong 942K print, but let's ignore that: after all bad news is good news (although as the chart below shows even this number was highly skewed due to seasonal adjustments and the NSA number hasn't really budged in the past year). But look at the housing starts: what a whopper: at 1036K, this was the highest print since June 2008 - great news, right? Not really, because the one key indicator here, single-family units, actually posted a sizable drop from 650K in February to 619K in March. The offset: construction starts of multi-family, aka rental units, which in March was a whopping 392K, a 83K seasonally adjusted surge from February, which brings the total multifamily starts to the highest since January 2006 at 423K. Of course, in January 2006, single-family units hit a record 1823K, or about three times as much as the March 2013 number. Thank you Fed and QE for making yet another capital allocation mockery as America is increasingly shifting into a nation of renters. At this pace expect multi-family starts to surpass single unit starts in 4-6 months for the first time ever.

Housing Permits seasonal vs non-seasonally adjusted number:

And Housing Starts: note the single vs multi-family divergence:

Source: Census Dept


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Tue, 04/16/2013 - 09:09 | 3455729 cutefarts
cutefarts's picture

IMF Cuts World Growth Forecast for This Year to 3.3% From 3.5%


Tue, 04/16/2013 - 09:10 | 3455734 orangedrinkandchips
orangedrinkandchips's picture

who in THE HELL would want to buy or own a house!!!


fuck that!

Tue, 04/16/2013 - 09:12 | 3455742 disabledvet
disabledvet's picture

You mean "a house inflated by Wall Street ten fold." this ain't the Fed's doing dip shits. They driving up the value of DEBT not land.

Tue, 04/16/2013 - 09:24 | 3455807 orangedrinkandchips
orangedrinkandchips's picture

Partly! but very good Disabledvet.....


Thats you are buying this overpriced dirt is just the first part.....


how bout taxes, upkeep, etc. etc. etc. It never ends!!

Tue, 04/16/2013 - 09:26 | 3455810 Osmium
Osmium's picture

Bought my house and 2 acres of land in 1991 for 55k.  Haven't had a house payment in 10 years.  I'm still a slave to property taxes though :(

Tue, 04/16/2013 - 09:46 | 3455918 akarc
akarc's picture

Love the school taxes I pay. Oh wait. I don't have rug rats.

Tue, 04/16/2013 - 11:17 | 3456324 vened
vened's picture

" I'm still a slave to property taxes though"


"How can a man be said to have a country when he has not right of a square inch of it."
Henry George

Ambrose Bierce (The Devil's Dictionary, 1911)
"LAND, n. A part of the earth's surface, considered as property. The theory that land is property subject to private ownership and control is the foundation of modern society.... Carried to its logical conclusion, it means that some have the right to prevent others from living; for the right to own implies the right exclusively to occupy; and in fact laws of trespass are enacted wherever property in land is recognized. It follows that if the whole area of terra firma is owned by A, B and C, there will be no place for D, E, F and G to be born, or, born as trespassers, to exist."


Tue, 04/16/2013 - 13:23 | 3457016 putaipan
putaipan's picture

+ greenie for any mention of henry george here at zh.

Tue, 04/16/2013 - 10:00 | 3455979 MachoMan
MachoMan's picture

Me?  A few issues: (1) I can't find what I want to rent at a price I can stand; (2) although it is consumptive in nature, I prefer to have brick and mortar in my asset portfolio to paper and counter party risk; (3) credit is cheap and, at present, the interest payments are deductible (presuming that you have more itemized deductions than the standard deduction); (4) there are plenty of other deductions if you're situated to take advantage, e.g. home office, home farm, etc.; and (5) I don't really have the same feeling about a rental as I do my own home, e.g. pride, comfort, security, customizability, etc.

It's pretty common really...  The issue that people ran into with housing was that they got way more housing than they needed...  and, since it's largely a consumptive endeavor, their wants ultimately got the best of them as prices finally went down.  If you don't over extend yourself AND use a portion of it for business and take advantage of all applicable deductions, etc., then it can be something that is not particularly worrisome.

Tue, 04/16/2013 - 11:41 | 3456464 syntaxterror
syntaxterror's picture

"Who in THE HELL would want to buy or own a house?"

Apparently the US Government since they own and backstop 90% of the mortgages out there.

Tue, 04/16/2013 - 09:12 | 3455740 azzhatter
azzhatter's picture

The collectivists want us all living together-easier to control. You can snitch on your neighbor easier

Tue, 04/16/2013 - 09:23 | 3455798 DeadFred
DeadFred's picture

When you see all the futuristic flicks with the proles living in squalid warrens, someone had to build those squalid warrens. Stocks probably surged when they did.

Tue, 04/16/2013 - 09:55 | 3455961 Mercury
Mercury's picture

Or you could check out actual squalid prole warrens created by actual central planners:

Tue, 04/16/2013 - 09:56 | 3455970 MiltonFriedmans...
MiltonFriedmansNightmare's picture

The collectivists want us all living together-  Agenda 21 "Microapartments" are roughly the size of a parking space; bullish for Ikea....just sayin...

Tue, 04/16/2013 - 09:14 | 3455743 ebworthen
ebworthen's picture

Rental units in areas where rents can be raised at will.

Entitlement payments will have to be increased to keep pace.

Tue, 04/16/2013 - 09:16 | 3455747 Dr. Engali
Dr. Engali's picture

Looks like we are taking a cue from China and building out a bunch of rentals that people can't afford.

Tue, 04/16/2013 - 09:18 | 3455770 fonzannoon
fonzannoon's picture

the single family homes will all be owned by foreigners but they will build the apartment complexes right next to the applebee's and target so the rest of us can walk to work. 

Tue, 04/16/2013 - 09:37 | 3455866 Dr. Engali
Dr. Engali's picture

Fonz...don't ever say that again. If I ever have to work in a restaurant again just friggen shoot me. I spent enough of my early life in that industry. If I am ever in a position that I have to go back then I think I will just be inserted back into the matrix and syphon my existance off of the rest of you.

Tue, 04/16/2013 - 09:38 | 3455879 fonzannoon
fonzannoon's picture

I actually considered that if you would believe me....that's why I included Target.

Tue, 04/16/2013 - 10:08 | 3456016 azzhatter
azzhatter's picture

Dr gets the Target job

Tue, 04/16/2013 - 09:39 | 3455882 Bearwagon
Bearwagon's picture

We'll have you back out of the matrix in no time, don't you worry. You are not in this alone.

Tue, 04/16/2013 - 09:47 | 3455933 akarc
akarc's picture

"If I ever have to work in a restaurant again just friggen shoot me."

Ah yes, those were the days. When all I had to worry about was how to get from one week to the next. Whoops, wait a second.....

Tue, 04/16/2013 - 09:22 | 3455786 ebworthen
ebworthen's picture

Some of those in my neck of the woods.

"Luxury" apartments charging 20%-25% over average, place is empty.

I suppose if they can't make the loans for the construction it won't matter, will just be written off or marked to Unicorns like all the empty retail space in town.

Tue, 04/16/2013 - 09:52 | 3455955 akarc
akarc's picture

"Luxury" apartments charging 20%-25% over average, place is empty."

Which calls to question I have long had on my mind, how do motels make money? Jesus I pass boo coo no tell motels with vacancy signs and there are usually only enough cars in the parking spots to account for employees. Assuming they drive of course.

Not including those in Biloxi or vegas that make a killing off those who like to throw money away. Jesus, they could do that in the stock market and never have to leave home.


Tue, 04/16/2013 - 09:16 | 3455748's picture

Once the hedgefunds get the bulk houses they bought fixed up and on the rental market it will hurt the mf/apartments as people would much rather rent a house then an apartment.  In addition groups are building these apartment and leasing them out only to turn around and sell them at a crazy low cap rate.  Just wait until those rental rates start to drop and the cap rates go to zero or worse in a few years

Tue, 04/16/2013 - 09:27 | 3455816 augustusgloop
augustusgloop's picture

hedge fund single family rental scheme is bound to fail. it's the lowest 'tranche' as it were of the rentai biz. property management, repairs/upkeep much more costly on a per unit basis. there is a reason it wasn't done in the past: it doesn't work on a large scale. 



Tue, 04/16/2013 - 09:45 | 3455893's picture

The management will be difficult and your right about repairs.  Once they realize this rental plan doesnt work so easily they will dump these home on the market all at once, the danger is they all opporate with group think and that could be a lot of inventory all of a sudden.

Tue, 04/16/2013 - 09:27 | 3455823 booboo
booboo's picture

Yes, all wood frame and stucco multi family built by the lowest bidder inspected by the Municiple Inspection Monopoly to meet the MINIMUM code. They rot from the inside out. The owners know just about how long it is before the problems start showing up and sell. I'm trademarking "Krugmanvilles", has to be worth something...right?

Tue, 04/16/2013 - 10:14 | 3456037 edifice
edifice's picture

Someone needs to pull an Office Space and create a complex called, "Morning Wood Apartments."

Tue, 04/16/2013 - 09:18 | 3455765 gaoptimize
gaoptimize's picture

I'm sure that TPTB consider the increase in multi-unit a win, like increased mass transit usage (miles driven collapsing), and greater Government dependency.  Go long motorcycles and bicycles as workers reduce their suburban commutes and move into appartments closer to their jobs.  Short Lowes/Home Depot?

Tue, 04/16/2013 - 10:12 | 3456031 edifice
edifice's picture

In 20 years, most U.S. metro areas will resemble Beijing in the 70s... Lots of bicycles and pedestrian traffic, very little auto traffic.  Conversely, Beijing will be in the opposite situation.

Tue, 04/16/2013 - 10:36 | 3456121 adr
adr's picture

You think that many Americans know how to ride a bicycle?

Ever see a 300lb woman try to get on a Chinese made Schwinn? The frame and spokes colapse in seconds.

Go long splints and neck braces.

Tue, 04/16/2013 - 14:19 | 3457284 Binko
Binko's picture

In 20 years Beijing will be a toxic wasteland filled with cancer ridden semi-invalids who need to wear an environmental suit just to go outside. The structure of Chinese society simply isn't equipped to deal with environmental problems.

Adding in the pollution from all the new power plants that are already under construction and from all the new vehicles that will be sold in the next few years will probably push most Chinese urban areas over the edge of livability.

Tue, 04/16/2013 - 09:20 | 3455773 bonzo112358
bonzo112358's picture

Us regular Joe's, at least here in socal, are priced out.  The all-cash investor is winning.  Then again, would I really want to pay $1200+/sq ft for a place like this?

Stupid is as stupid does.  And stupid is definitely doing.

Tue, 04/16/2013 - 09:42 | 3455890 Bearwagon
Bearwagon's picture

That hut costs so much? Almost unbelievable ....

Tue, 04/16/2013 - 10:22 | 3456076 hangemhigh
hangemhigh's picture

@ bonzo

Then again, would I really want to pay $1200+/sq ft for a place like this?

it's not about the money,'s about the lifes tyle......this is lebowski's melrose crib......nice place to pack a bowl and walk your ferret..... 

Tue, 04/16/2013 - 12:15 | 3456703 bonzo112358
bonzo112358's picture

You're absolutely right.  It's the 'hey look where I live and you don't' hipster mentality.  The prices out on the westside of Socal are higher than they were in last bubble 5 years ago.  Amazing how soon people forget and think this time it's different.  Visit doctorhousingbubble if you get a chance to enjoy some of the farce that is the Socal housing market and enjoy some of the bullish comments such as my favorite: "houses are selling therefore they are priced right".

Tue, 04/16/2013 - 12:26 | 3456746 billsykes
billsykes's picture

Don't you know a million is the new 80 grand. 


Here is a million dollar home:

the new 80 grand I tells ya. 

Tue, 04/16/2013 - 20:48 | 3458935 ersatzteil
ersatzteil's picture

Nonsense! You can live and work in SoCal, just consider taking a longer commute. Sentri Pass, bitchez

186$/sq ft, stone and teak imported from Bali:

Tue, 04/16/2013 - 09:22 | 3455801 dryam
dryam's picture

Weird, all I read in the headlines of several news sites was that housing starts were way up & the economy is clipping along at a grand pace.

Tue, 04/16/2013 - 09:31 | 3455844 The Invisible Foot
The Invisible Foot's picture

Will be living in a apartment soon near you.

Tue, 04/16/2013 - 09:41 | 3455886 arm50
arm50's picture

they have to build all those dorm rooms

Tue, 04/16/2013 - 09:48 | 3455920 edifice
edifice's picture

Houses are undervalued.  Use FRED and enter these criteria:


Q1 2000 = 100

Tue, 04/16/2013 - 09:51 | 3455944 Mercury
Mercury's picture

That all depends on what the rules are (will be) and what your cost of carry is (will be).

Tue, 04/16/2013 - 10:15 | 3456043 edifice
edifice's picture


Tue, 04/16/2013 - 09:48 | 3455937 Mercury
Mercury's picture

At this pace expect multi-family starts to surpass single unit starts in 4-6 months for the first time ever.

Followed closely by federal rent control.

Tue, 04/16/2013 - 10:01 | 3455982 MiltonFriedmans...
MiltonFriedmansNightmare's picture

Rent control?  Have you forgotten that the US is a fascist, not a socialist state?

Tue, 04/16/2013 - 10:07 | 3456005 MachoMan
MachoMan's picture

True, but what will happen is that the government will both subsidize the monthly payments (paying them on the tenants' behalf) AND cap the amount it's willing to pay...  think medicaid.  So the investors get a guaranteed nominal income stream and J6P gets a house...

[so long as the other tax mules keep trotting]

Tue, 04/16/2013 - 10:08 | 3456015 Mercury
Mercury's picture

So, not a quacking, waddling aquatic bird but a duck?

Tue, 04/16/2013 - 10:08 | 3456009 Son of Loki
Son of Loki's picture

Renting is still super cheap in my area. House prices are moving sideways since Christmas and a little down in some palce. Issue is, taxes (esp school taxes) are soaring to pay for things like extra security. Insurance and maintenace are seriously rising. For now, renting is still so cheap and gives you lots of flexibility to move when and where you are needed or want to go. Selling a house is a B*tch---commissions, fees, etc are about 10% of the seling price.

Tue, 04/16/2013 - 10:12 | 3456025 Bicycle Repairman
Bicycle Repairman's picture

This whole rental housing investment story sounds neat-o, especially when rent on your money at the bank is 0.

But once you're locked into your illiquid investment, with on-going maintenance and tax payments, the concept may sour a bit.  Those payments will go up >>> rent.  When interest rates rise your equity (20%+ you earned by the sweat of your own brow) will evaporate.  So "flipping" will not be an option.

Then there is the political environment.  On one side is you, the landlord.  On the other, struggling "working" people with no jobs and rugrats, precious rugrats.  Think section 8 will save you?  Maybe for now, just keep in mind, it is an "entitlement".  Oops no rent this month.

Be sure all of this is in the spreadsheet.

Tue, 04/16/2013 - 10:15 | 3456038 Bicycle Repairman
Bicycle Repairman's picture

Oh, and during the early period, if you do earn a profit, the folks downtown and in Washington view you as a scumbag rentier, an enemy of society, and you will be taxed accordingly on your income.

Tue, 04/16/2013 - 10:31 | 3456104 adr
adr's picture

These aren't apartments for working people to live in. These are glorious low income housing projects, $250k per unit condos, that you get to pay the rent for.

Perhaps front running the immigration bill that will bring at least 50 million more 3rd world Democratic voters to the country in three years or less.

My favorite thing is to drive by the picturesque brand new brick rowhome communities in the ghetto, complete with iron streetlights and playgrounds that could almost make the resdidents of the Jewish communities jealous. Near the front street entrance you see the sign, "A Lennar Corporation Community".

Tax dollars to build, tax dollars to house, tax dollars to feed, and tax dollars to clean. None paid by a single person living there.

Tue, 04/16/2013 - 10:38 | 3456127 MiltonFriedmans...
MiltonFriedmansNightmare's picture

@ adr;  almost sounds as if Lennar is a subsidiary of Walmart.

Tue, 04/16/2013 - 10:57 | 3456221 torak
torak's picture

This is cool.  Sort of like the building boom in Thailand where combination shop / dwelling were the sub-prime bubble rage, just before the 1997 banking implosion.  I think that all you need to be is a student of history and watch for a slightly different permutation of the same old shit and invest accordingly.

Tue, 04/16/2013 - 11:02 | 3456242 dizzyfingers
dizzyfingers's picture

In our area what drove "value" of homes up was the muni workers' pay and benefits/pensions; assessors inflated homes' value in order to transfer that money into the pockets of municipal (and teachers') union workers. Now that houses aren't selling, we're still getting taxed at the same high rate ("value"), and no end in sight. DO NOT BUY REAL ESTATE.

Tue, 04/16/2013 - 12:20 | 3456724 billsykes
billsykes's picture

Its because the time to build multi-family is generally short- most of the stuff was built in the 80's and late 70's so its now 33 yrs old from 1980- 

what's the economic life of this building? what is the hidden costs of upkeep for a old place or whats the utilities costs even with in suite metering? 

Its better to do a large 50 story apartment building now because its easier for the builder to get financing and its easier for the buyer to get financing as its not old. (extend and pretend in real estate) longer terms means lower payment, lowering the opportunity cost to get in.

as per the agenda 21 and all that- it's inevitable so suck it up. The upside is density is pretty cool- go to any 1st world dense city and its great- tons of shops and restaurants lots of chicks and clubs and stuff to do. You shouldnt be at home all the time anyway, the only way to get ahead is network. 

If you want to get away for the weekend go camping/cottage/beach house/etc you don't have to travel far.  

Is New York not cool? Hating it- rent a car leave go north or east - what an hour and a half you are out of town. in the wilderness. 


Tue, 04/16/2013 - 12:51 | 3456870 edifice
edifice's picture

Is New York not cool? Hating it- rent a car leave go north or east - what an hour and a half you are out of town. in the wilderness. 

...Until they fully implement said Agenda 21 and you can no longer leave your designated zone in the, city, without travel documents.

Tue, 04/16/2013 - 13:23 | 3457009 billsykes
billsykes's picture

I am done worrying about that shit. There is going to be no movement against until it has happened. Everysingle person working in DNA, science, tech are all working towards the domination of man under the guiese of helping cure or discovering this, or friend this. I am checked out of that mentally, that state of perpetual fear and anger mixed with apathy is perfect for them, not for me. Move to africa or some 3rd world country to live out your life if it is that destabilizing to your lifestyle. 


Tue, 04/16/2013 - 13:12 | 3456960 miker
miker's picture

I live in Charlotte NC.  Huge building boom of these large, boxy apartments buidling that have parking in the interior.  The units are generally very small (500 sf).  Charlotte has 15000 units being built or on the table.  Probably more to come.  I think they are already overbuilt but who cares?  Moral hazard has been removed.  These developer will make their money and walk away.  Just another bubble to create jobs.  I heard that Fannie/Freddie are financing all this stuff.  Anyone know if that is true?

I figure these will end up being public housing in next few years +. 

Tue, 04/16/2013 - 13:15 | 3456976 Dre4dwolf
Dre4dwolf's picture

They are not driving up the value of land, simply the paper backed up by the land.


I have been looking to buy a house, every house I have seen in staten island ~ Brooklyn that has some kind of debt attached to it is worth around 70~ 90k (because they need soooooo much work (side-walks need to be ripped out and disposed of, roofs collapsing, inside is too dated, half finished renovations, poor electrical work because they were trying to cut costs and "doit themselves")..... list goes on, every house on the market right now (pre-foreclosure/foreclosure/bank owned) is complete garbage, need to be completely gutted, but they are listed 290,000~500,000 (staten island), and 450,000~ 800,000 Brooklyn (and not even in the "good areas") its a mess, there are over 1100 foreclosures/pre-foreclosures PER ZIP CODE n New York and its 5 boroughs, I simply dont even have enough time to look at them all there are sooo many, but the 50 ~ 60 or so I have seen are about priced about 60% over fair market value (when you count the work that needs to be done just to make them rentable/livable).


The banks are stupid, if they hold onto these houses they will simply just keep paying the taxes forever the price of the homes is only going to go down (what they will get in the long-run) because they are essentially going to be condemned properties waiting to be ripped apart and thrown out.


Tue, 04/16/2013 - 13:29 | 3457054 kennard
kennard's picture

Rental housing starts should not be seasonally adjusted.

The story is actually worse than ZH portrays.

Tue, 04/16/2013 - 14:49 | 3457434 Tetres
Tetres's picture



BUILDING PERMITS: Privately-owned housing units authorized by building permits in March were at a seasonally adjusted annual rate of 902,000. This is 3.9% below the revised February rate of 939,000, but is 17.3% above the March 2012 estimate of 769,000. Single-family authorizations in March were at a rate of 595,000; this is 0.5% below the revised February figure of 598,000. Authorizations of units in buildings with five units or more were at a rate of 283,000 in March.   

NOW for the rest of the story....the unadjusted real number came in at 75,100 a huge 826,900 divergence....meaning seasonally fuzzy math numbers were massively inflated (link to report)


HOUSING STARTS: Privately-owned housing starts in March were at a seasonally adjusted annual rate of 1,036,000. This is 7.0% above the revised February estimate of 968,000 and is 46.7% above the March 2012 rate of 706,000. Single-family housing starts in March were at a rate of 619,000; this is 4.8% below the revised February figure of 650,000. The March rate for units in buildings with five units or more was 392,000.

NOW for the rest of the story....the unadjusted real number came in at 85,800 a huge 950,200 divergence....meaning seasonally fuzzy math numbers were massively inflated (link to report)


HOUSING COMPLETIONS:  Privately-owned housing completions in March were at a seasonally adjusted annual rate of 800,000. This is 11.0% above the revised February estimate of 721,000 and is 36.3% above the March 2012 rate of 587,000. Single-family housing completions in March were at a rate of 593,000; this is 2.6%  above the revised February rate of  578,000. The March rate for units in buildings with five units or more was 202,000.

NOW for the rest of the story....the unadjusted real number came in at 61,400 a huge 738,600 divergence....meaning seasonally fuzzy math numbers were massively inflated (link to report)



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