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Housing Starts Slide In Latest "Housing Recovery" Disappointment; Permits Rise On Expectations Of Rental Surge

Tyler Durden's picture


Today's housing starts number is merely the latest datapoint confirms the housing bottom callers will be once again early. In March, housing starts, expected to print at 705K (which is crawling along the bottom as is, so it is all mostly noise anyway, but the algos care), came at a disappointing 654K, the lowest since October 2011, and a third consecutive decline since January. Want proof that the record warm Q1 pulled demand forward? This is it. As the chart below shows, the all important single-unit housing starts have not budged at all since June 2009. So was there any good news in today's data? Well, housing permits, which means not even $1 dollar has been invested in actually 'building' a home soared to 747K, from 715K in February, and well above expectations of 710K - the highest since September 2008. That a permit is largley meaningless if unaccompanied by a start, not to mention an actual completion goes without saying. However, what is notable is that even the permit dat was skewed: single unit structures came at 462K, lower than February's 479K. Where the ramp was in 5 units or more, aka multi-apartment units, aka straight to rental. It appears that now everyone is piggybacking on the administartion's REO-to-rent plan, and instead of buying "home to buy", all future constrcution will be apartments to rent. Which is great: since rents have been going up, builders are already redirecting their attention to the one segment in the market that is not moribund. As a result, in a few short months expect a glut of rental properties, which will kill even the incipient possibility of a recovery, as the supply drowns any latent demand, as more and more households shifts from owner to renter mentality.

Housing starts: single vs multi-unit. One can be excused for confusing the all important red line for a flat line. It is.

As for permits, note the increasing spread between single and total units, or in other words, the implicit bet on an increase in rental demand:


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Tue, 04/17/2012 - 08:50 | 2351002 FOC 1183
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Tue, 04/17/2012 - 08:54 | 2351014 Gully Foyle
Gully Foyle's picture

Wouldn't that be an "unexpected" disappointment?

Tue, 04/17/2012 - 08:55 | 2351016 junkyardjack
junkyardjack's picture

Bullish on me getting a new apartment when all those condos that have been going up like weeds convert to $800 a month rentals

Tue, 04/17/2012 - 08:58 | 2351029 ihedgemyhedges
ihedgemyhedges's picture

I live in an MSA with about 300K population.  MASSIVE apt complexes being built all over the area.  Single family construction is in a depression...............

Tue, 04/17/2012 - 09:06 | 2351041 SheepDog-One
SheepDog-One's picture

'Projects'. And look how futures just love it! Opening up almost the standard +1%....centrally controlled fascist dictatorship.

Tue, 04/17/2012 - 09:33 | 2351115 ihedgemyhedges
ihedgemyhedges's picture

Not all projects.  3 of the bigger sites I've seen are high end and gated.  Tells you about folks with enough to pay large rent not wanting to own their own house...........

Tue, 04/17/2012 - 10:29 | 2351317 Whoa Dammit
Whoa Dammit's picture

Even the "high end" multifamily developments are projects. They are built with tax exempt federal bonds requiring a certain percentage of occupants to be low income.

"Developers who agree to set aside a portion of a financed project’s units for low or very low income tenants are eligible for tax-exempt financing. A minimum of 20% of the units must be set aside for individuals earning no more than 50% of the area median income. Alternatively, developers have the option of providing 40% of the units to individuals at or below 60% of the area median income."

Tue, 04/17/2012 - 09:11 | 2351058 slaughterer
slaughterer's picture

Google images for "Plattenbau" and confront your future USA.    

Tue, 04/17/2012 - 09:20 | 2351077 Dr. Engali
Dr. Engali's picture

I certainly hope you are wrong,but my suspicions are that you probably aren't.

Tue, 04/17/2012 - 09:49 | 2351170 GeezerGeek
GeezerGeek's picture

Those images look like they came from the Soviet era 'workers' paradisc', or maybe even the Cabrini-Green fiasco in Chicago.

Tue, 04/17/2012 - 09:16 | 2351069 Chupacabra-322
Chupacabra-322's picture

@ ihedgemyheges,

Agenda 21.

Tue, 04/17/2012 - 09:23 | 2351084 Dr. Engali
Dr. Engali's picture

My daughter ,who is 13, is heavy into the hunger games books and movies. I thought it would be a good tool to enlighten her . I use the books to draw parrallels with agenda 21. Funny thing is for the first time ever my wife is paying attention to the conversation.

Tue, 04/17/2012 - 10:37 | 2351344 Chupacabra-322
Chupacabra-322's picture

Good to hear.  Turn her on to this;

Agenda 21 is Sustainable Development, and was created through the United Nations. It is the blueprint for depopulation and total control, under the banner of saving the environment.  It is like the head of a beast that has thousands of tentacles, originating from the United Nations.

Tue, 04/17/2012 - 11:29 | 2351576 benb
benb's picture

And let’s not forget the “UN” is just a front for the Global Crime Families. The same criminal psychopaths that control the U.S. military, the Federal government, poison our water, poison our food, and create the environmental frauds like the World Wildlife Fund, as take-over cover.

Tue, 04/17/2012 - 08:56 | 2351019 Snakeeyes
Snakeeyes's picture

Mostly multifamily. Single units fairly flat.

Glad that Fed policy is working so well!!!!!!!!!!!!!!!!!!!!!!!




Tue, 04/17/2012 - 08:55 | 2351021 Toolshed
Toolshed's picture

Hey Lee some more shit please. We all need a good laugh.

Tue, 04/17/2012 - 08:55 | 2351022 cossack55
cossack55's picture

I will be building a new home as soon as I can assemble enough cardboard.

Tue, 04/17/2012 - 09:13 | 2351064 SheepDog-One
SheepDog-One's picture

Hey at least Spring has sprung.

Tue, 04/17/2012 - 08:58 | 2351026 jus_lite_reading
jus_lite_reading's picture

Where's good old Bob "I want to sell my house so I'm writing bullish articles" Brusca when you need him?


Tue, 04/17/2012 - 08:59 | 2351030 monopoly
monopoly's picture

And these insolvent builders are building single family homes because.....?

Tue, 04/17/2012 - 09:34 | 2351121 Eugend66
Eugend66's picture

..... because spending their monies now on something tangible is better than what is in store for them (non-TBTF).

Tue, 04/17/2012 - 09:49 | 2351172 jus_lite_reading
jus_lite_reading's picture

.... because theres not enough inventory or shadow inventory to last twenty lifetimes?

Tue, 04/17/2012 - 09:07 | 2351036 SheepDog-One
SheepDog-One's picture

Housing has been Brusca'd, he top ticked that like a pro.

But 'dissapointment'? Futures look like they gobbled a handful of Viagra. 'Markets' 100% broken.

Tue, 04/17/2012 - 09:57 | 2351196 GeezerGeek
GeezerGeek's picture

Who should be called if the rise in the SPX lasts more than four hours?

Tue, 04/17/2012 - 09:16 | 2351044 Dr. Engali
Dr. Engali's picture

It's looking more and more like the fed will be loading up on MBSs when they do QE3.

Tue, 04/17/2012 - 09:09 | 2351045 Hubbs
Hubbs's picture

Wait a minute, so now we go from housing boom/bubble  to apartment boom/bubble? After all these rental units get built, the supply will exceed demand (families consolidating acrosss the generations into one housing unit) and guess what? Rents will start dropping too.  A mini echo of the housing boom/bust to follow?

Tue, 04/17/2012 - 09:27 | 2351096 WonderDawg
WonderDawg's picture

That's the way I see it, too. One of the reasons I'm not looking to get into the rental business. That and I expect difficulty in collecting rent in the future.

Tue, 04/17/2012 - 09:39 | 2351139 MachoMan
MachoMan's picture

Collecting rent is largely a function of weeding out prospective tenants on the front end (credit check, deposit, instinct, etc.)...  but, even if you don't collect rent, you simply need to own rental units in a jurisdiction that is landlord friendly (most are, given there isn't much of a tenant lobby).

How far your market will fall is anyone's guess, but clearly it WILL.  As a result, don't pull the trigger until you get a deal cheap enough to mitigate the risk.  For me anyway, there ARE some deals out there, it's just that they're few and far between (at best).

Tue, 04/17/2012 - 09:59 | 2351206 GeezerGeek
GeezerGeek's picture

Isn't overbuilding of real estate a big part of Spain's problem? So which are we destined to be, Greece, Japan or Spain?

Tue, 04/17/2012 - 09:08 | 2351049 TideFighter
TideFighter's picture

The buy way less than market and sell at less than market is hot.

Tue, 04/17/2012 - 09:08 | 2351050 Village Smithy
Village Smithy's picture

The more rental units that are built the less demand for those single family units that are currently flooding the market. Good luck with that.

Tue, 04/17/2012 - 09:12 | 2351056 SheepDog-One
SheepDog-One's picture

Finding a shitty noisy apartment to rent that you can afford with your govt check and still have a bit left over for some food....the new american dream.

Tue, 04/17/2012 - 09:16 | 2351068 Village Smithy
Village Smithy's picture

That's OK, once we are confined to apartments we will once again start to discuss things with each other face to face, like we use to. Electronic eavesdropping of the internet and cell networks will become much less effective.

Tue, 04/17/2012 - 09:23 | 2351083 VisualCSharp
VisualCSharp's picture

Very well said, SheepDog. It's a simple matter of affordability. With so many Americans on food stamps or other forms of implicit or explicit welfare, is it any wonder folks can't afford a mortgage or don't have adequate credit for one? I think single family homes will once again return to being a luxury, much like they were in the past.

Tue, 04/17/2012 - 09:41 | 2351150 MachoMan
MachoMan's picture

It actually is the american dream...  it's just for a select few who are happy to stuff the underclass into that type of housing...  and get them away from the gated communities...  the large complexes can also police themselves...  freeing up security forces to beat/jail straglers.

Tue, 04/17/2012 - 09:13 | 2351063 overmedicatedun...
overmedicatedundersexed's picture

as quality of life and income deteriorates the people move from home ownership to apartments to trailers to tents to caves...bullish on those tent and outdoors furniture sellers

Tue, 04/17/2012 - 09:15 | 2351065 midtowng
midtowng's picture

Wasn't it the housing bust that got us all into this mess? So why does anyone think that the bad times are behind us when the housing market is still dragging the bottom?

Tue, 04/17/2012 - 09:18 | 2351072 Hansel
Hansel's picture

Just FYI, housing starts is another garbage data point.  It is a 'seasonally adjusted' annualized number with enormous error margins.

Privately-owned housing starts in March were at a seasonally adjusted annual rate of 654,000. This is 5.8 percent (±15.6%)* below the revised February estimate of 694,000, but is 10.3 percent (±14.6%)* above the March 2011 rate of 593,000.

Tue, 04/17/2012 - 09:17 | 2351073 fonzannoon
fonzannoon's picture

So the data is weak and futures are bright green. That would indicate the weak data=qe trade no? If so then why is gold and silver just sittin there?

Tue, 04/17/2012 - 09:26 | 2351091 SheepDog-One
SheepDog-One's picture

I think everything has just gone irrelevant, total central planning, total fascism.

Tue, 04/17/2012 - 09:31 | 2351109 fonzannoon
fonzannoon's picture

Yeah at this point it just feels like insanity.

Tue, 04/17/2012 - 09:20 | 2351080 orangegeek
orangegeek's picture

The Philadelphia Housing Index has been moving sideways since 2009.  This is not a bullish move, but more of a corrective move to the collapse that started in 2006.


The next leg down of this Housing Index should follow the Dow Jones pattern down:

Tue, 04/17/2012 - 09:24 | 2351082 Mitch Comestein
Mitch Comestein's picture

All those 'new' landlords buying the dip are going to be in the house of pain in a few years.  Prop tax up, repair costs up, rents down.


Tue, 04/17/2012 - 09:39 | 2351087 Mercury
Mercury's picture

Ben prints dollars, Barry prints voters.

Behold the expansion of the fiat voter base.

The (especially this) government  actually loves a bias towards renting because that usually means more Section 8 housing.

A vote from someone on food stamps and in government controlled housing counts just as much as a vote from a middle class, long term wealth building homeowner.  Guess which one is easier to produce?

It's only a matter of time before Obama starts referring to Americans who are lifetime net takers of government funds as "stakeholders" in government.

Tue, 04/17/2012 - 09:23 | 2351088 zonetraders
zonetraders's picture Latest technicals charts for SPX to 1375 before the next wave of correction

Tue, 04/17/2012 - 10:16 | 2351271 banksterhater
banksterhater's picture

charts MEAN NOTHING w/ Fed intervention using Primary Dealer Cartel.

Tue, 04/17/2012 - 14:19 | 2352222 TheFourthStooge-ing
TheFourthStooge-ing's picture

More crapital3x spam fromfuckhead spammer zonetraders.


Tue, 04/17/2012 - 09:43 | 2351157 Shizzmoney
Shizzmoney's picture

Vacancy rates are out the wazoo for a few reasons:

A) The cities with reasonable unemployment, like Boston (around 6.9-7%), happen to have high costs of living.  This eats into earners income, especially ones under 40.  That means no confidence to take on a mortgage (unless mommy and daddy pay for it) and more renting (on top of the fact that the median income has remained flat these past few years....some have even suggested lower).

B) Young generations, 18-35, are putting off kids due to student loan and credit card debt (esp the smart ones).  Less families=less demand for houses.  We all don't have Scrooge McDuck Capital.  On top of that, in areas where there are some good earners, the market is completely skewered to them.  Meaning, more houses for rich people, and less for middle class/poor people.  Which maybe forces some fiscal responsibility.....but our economy is built of housing values rising, and construction of new property due to demand.  And that ain't happenin'!

This also means more renters, and more property being consolidated to tycoons and corporations.  Smell that fascism!

C) Why would anyone with a shaky income/job prospect outlook, but smart enough to you know, read the paper, ever fucking sign ANYTHING with a bank at this point?  Renting is almost even considering a more "free" option: no worrying about losing the value of your home; the worry of flipping/selling it (if you can find a new job) and not getting screwed out of value; and of course, the potential rising interest payments.  

People are slowly, but surely, decoupling themselves from finanicial serfdom.  I am, at least.  That means: no credit cards, no house, and even no car.  People are sick of the harassment and the finger fucking of our wallets.  We deal with enough from the gov't; we don't need the 3 finger treatment from the private sector.

Tue, 04/17/2012 - 10:00 | 2351213 prains
prains's picture

The great thing about builders converting to wood framed mulit story walk ups is they take their already shitty building techniques and mass produce it on a greater scale. Leaky, moldy, windy,cold and noisy is the new normal.

Tue, 04/17/2012 - 10:04 | 2351229 banksterhater
banksterhater's picture

They're overbuilding rentals, like the last bubble, free money ZIRP malinvestment. Those hedgefunds buying GSE for rent will dump a lot more in.

Tue, 04/17/2012 - 10:16 | 2351273 Bansters-in-my-...
Bansters-in-my- feces's picture

I wondered why the DOW was surging,now I know.

Tue, 04/17/2012 - 10:20 | 2351283 NEOSERF
NEOSERF's picture

My brother builds in MA and says that permit pulling is simply frontrunning on hopium that if demand comes back they will be in a position to get a shovel in the ground...absolutely useless statistic...what matters is housing starts, completions, and sales

Tue, 04/17/2012 - 11:00 | 2351432 writingsonthewall
writingsonthewall's picture

It always makes me laugh to watch the shills bang on about new housing starts as a 'sign of recovery' - regardless of the circumstances

If the new starts are driven by DEMAND for new houses - then all well and good - could be a recovery (or hyperinflation) on the way.


However (as is the case now) the upsurge in new housing starts are coming from a building industry which has workers 'sitting on their hands' and investors who are 'cash rich but fearful of the market' - the combination of which will always lead to a rise in new builds.

This is where markets and demand start to diverge.

In the UK some clown has just come up with a scheme which allows first time buyers to have their mortgages backed by the Govt. - as long as they buy new builds.

This has prompted a massive building programme by the builders (in anticipation of renewed demand) and eventually will result in a glut of new build properties with a distinct lack of demand for them.

This is how you get 'several bottoms' in a depression - as the excited return of expected demand sends supliers into a temporary flurry......until they realise their folly.


It's not much different in America - the rise in rental will only last as long as the confidence in one's job. When you see so many people you know getting fired - it's not really confidence building is it?

Tue, 04/17/2012 - 11:17 | 2351509 Since 1794
Since 1794's picture

I'm scrambling to figure out why homebuilders are up today.  Any ideas?

Tue, 04/17/2012 - 17:31 | 2352756 smiler03
smiler03's picture

"This has prompted a massive building programme by the builders (in anticipation of renewed demand) and eventually will result in a glut of new build properties with a distinct lack of demand for them."

You seem to have very odd ideas. Perhaps you should read before you write.

Massive building programme? You mean 16,000 in the entire country? The UK has a drastic housing shortage!

"Just 134,000 new homes were built in the UK in 2010, the lowest number since World War II. This is despite 230,000 new households being formed every year. By 2025 there will be a housing shortfall of 750,000 in England alone, according to the IPPR.

The shortage is hitting the younger generation hardest. A fifth of 18-to-34-year-olds has been forced to live with their parents because they can't afford to rent or buy a home, according to the charity Shelter. Commentators across the political spectrum agree the country faces a growing crisis but there is no consensus on how to fix the problem."


The Government backed scheme you talk of is about giving first time buyers the option of a 95% mortgage. Those mortagages used to exist in the UK for over 30 years, 2008 fucked that up and now most first time buyers are priced out of the market completely.

There are more than 500,000 houses that now contain children, parent and grandparents and that is set to soar as first time buyers are increasingly locked out of the market. The average mortgage now has a 40% deposit, completely out of reach of average wage earners.

Tue, 04/17/2012 - 13:19 | 2352010 Herkimer Jerkimer
Herkimer Jerkimer's picture

Financial Muppet Here.


If they're going to build more rentals, and since I'm smart enough to read Zero-Hedge, or at least take a look around at the market, with MORE inventory being rentals or single dwellings coming on the market, would you not think I would hold off, or move in 6 months or a year, when the inventory causes the prices to drop even further?

Oh, and what about all that shadow inventory coming on the market which will cause rents to drop, too?


Just wondering out loud.



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