Housing Starts Surge Entirely Due To Year End Channel-Stuffed Multi-Family Units
Once again the US Department of Truth succeeds in fooling the algos: today's November Housing Starts number was a blockbuster: at 685K annualized units, it came higher than the highest estimate (range was 600K to 655K), and certainly higher than the average estimate of 635K. It was obviously higher than the downward revised previous number of 627K. All great: housing soaring, employment must be back. Right? Wrong. One peek under the covers shows where all the "growth" comes from - the entirety of the surge was due to the absolutely hollow 5+ multi-family units which jumped by a whopping 25% sequentially, and which as everyone in the industry knows are nothing but inventory padding by homebuilders who "build just to build." Unfortunately, as the all important 1 Unit structure trendline shows, there is absolutely no improvement in this critical series. But hey - it fooled the robots. And now it will take at least 12-24 hours before vacuum tubes process the reality of this latest spin. By then, however, we may well have had our Christmas rally.
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Liquidation of the malinvestment will result in house prices near 1981 prices. Remember that huge mansion you wanted. It's going on sale very soon.
Hope you can afford the property taxes.
I'll believe it when I see it. The banks will let houses rot before they take the loss and let peasants live in them.
This is my domain.
Due to the fact that few people can qualify for now stricter and conventional mortgages, since they lost their jobs or filed for bankruptcy or have delinquent/non-payments on record (poor FICO; really poor) or had a medical emergency with bills they couldn't pay (since they were uninsured or underinsured) - they have to rent.
This is causing a boom in construction of apartments, which had been an aging stock while the housing boom was happening.
Month to month, bitchez, with no ownership interest (this is probably best, in all seriousness, as it is part of the deleveraging process).
The SWHTF this year and in 2013 when the REOs that have been kept off the market come rushing back onto the market, along with the additional foreclosures now happening and that will continue to take place, now that many of the issues (economic from the banks' standpoint, legal (MERS title issues), Fannie/Freddie trying to avoid listing REOs). This is when we'll see additional drops in nationalized housing values that will be greater than at any time since 2009, and spawn a further deleveraging pressure, as deeply wounded banks rush to raise capital, as they'll no longer have the luxury of waiting for the housing market fundamentals (mainly in terms of prices/values) to improve.
1981 was a fairly random date but the idea is the same and you hit on it. I said in 2009 that the real tragedy here is that everyone buying more house than they could afford but still with a decent credit score will now have neither. And the same apartment they used to live in wont take them because their credit score will have been crashed due to foreclosure.
So the people the government tried to help are even more screwed now.
Banks will own a lot of property after the reset. That concerns me even more.
The presentish banks won't own shit... they'll be thrown to the wolves, like the FED... eventually. The benefactors will be the private individuals (club members) who are directly responsible for a significant amount of this mess (and took their bonuses during the boom). The deleveraging process will play into their hands via the utilization of the wealth gap. Further, their institutions will be the successor banks that buy up the distressed assets (and claims on real property) for pennies on the dollar when the TBTF are systematically liquidated/nationalized.
The entities themselves are just a layer of liability protection for private actors... just a simple vehicle... ultimately, they're meant to be jettisoned when it means the rocket (actors) can boost into orbit.
Haven't dug into the release yet, but the figures sound suspicious. I don't know that I'd classify a jump multis as "channel stuffing" as multi family developers don't necessarily benefit from that.
What is important to remember, however, is that these are seasonally adjusted annual rates. So in other words they are saying it was a better month, but only as "Novembers" go. Home construction is extremely seasonal, and Nov-Jan is always very slow. So even if this is "good for a November" the low volume and high percent error would suggest this multi family number is not all what the headline makes it out to be. I'll check out the non-seasonal figures after a cup of coffee and report back :)
The National Association of Realtors should be prosecuted under the RICO Act.
This is actually the Census this time around, Precious :)
Anyway, I had a chance to dig into the release.
First things first, the Housing Starts number is entirely meaningless. The 90% confidence interval is gigantic, and includes zero. From the release:
* 90% confidence interval includes zero. The Census Bureau does not have sufficient statistical evidence to conclude that the actual change is different from zero.
Feel free to read it yourself: http://www.census.gov/construction/nrc/pdf/newresconst.pdf
So really, they don't know if Housing Starts went up or not. I'd expect not, at least not to that degree, because it would be unusual for multi-family developers to start an unseasonable amount of construction going into winter. However, they do appear to be pulling permits, assumably to begin construction in the spring in areas which get winter weather. The permits have a narrower 90% confidence interval because they have a much larger sample size. But on a year-over-year basis, nearly the entire percentage gain was due to 5+ unit buildings, which in current market conditions is going to mean apartments.
This is similar to what we've seen so far this year, apartment construction increasing as the single-family market hemorrhages homeowners. While apartment construction is good for some amount of economic activity, the bad news is that for every former homeowner that goes back to renting it means an additional unit of excess inventory in the for-sale housing market.
+1
My first thought was "Well, as the economy collaspes, people who can no longer afford a $3,000/m mortage plus yearly taxes are going to need cheaper housing." Then I thought about buying stock in a tent/camping company. Eureka anyone?
Right on here.
Bill Maher has echoed this a bit, and it's becoming more evident, my generation 18-30, is becoming a nation of renters. Unless you want to live in Ohio/Michigan - but that also brings another dilemma because the places where most of the jobs are, also happen to have the highest cost of living.
The majority of us, mired in debt, will never be able to buy a home/get into more debt to get a mortgage due to how "Life Red" most of us are.
Out of my close friends+family+acquaintences in my age bracket, around 35 of them, only 4 own homes. One works in the Postal Service, so he has a good, stable job (and a profession that bankers SPLOOGE to give loans to). My cousin works in construction sales and has a wife who is a mortgage broker for a bank, so they got a good deal. Another is an Optomitrist; but he had to move from MA to MD because the taxes here are so high, and the fact the houses cost an arm and a leg. And only one I know of actually owns a condo in the Boston area, but he has good-to-do parents who were the collateral (as part of a marriage gift).
Pretty much resigned to the fact I'll never own a place unless I want to move to Bumfuck, USA or win a WSOP bracelet.
I'll throw this one out there skipper... maybe renting isn't such a bad thing while the nominal prices of the things have nowhere to go but down. Granted, it's a ploy of timing... depending on your rent, it doesn't take many years before you should have bought... but that's what a spreadsheet is for (do your homework).
I'm in your age bracked and I own a home... but I also live in a place with the lowest cost of living in the country. And I'm planning on selling come June...
Rent, save, deleverage... wait until the weak hands shake out... hussle a little... and score a deal. You're probably not going to get a better rate of return on an investment than paying off debt...
Yup... the "American Dream" of home ownership is, in part, manufactured. Promoting housing as the engine to drive the American economy was a highly lobbied for position that required the government to choose winners and losers. And while he's making his spreadsheet, a handful of items won't fit neatly... like the flexibility provide to a renter. A little mobility in a job market that absolutely sucks may go a long ways.
Good luck to you. And knowing is half the battle.
The National Association of Realtors should be prosecuted under the RICO Act. Trouble by the Mafia is insignificant compared to the devastation the NAR perpetuated on Americans.
You are right. Renting is a good option. I tried to convince my wife we should sell 2 years ago. No go.
On the other side of the coin IF there is a debt jubilee you miss out.
That thesis presumes that home prices will increase along with inflation... I'd say that's incredibly presumptuous and, in all likelihood, impossible... bread, I'd buy that one... homes, not so much.
Again, I'll believe it when I see it. Banks are withholding REOs and loaning out for new multifamily projects so that people always have to pay. If the REOs were liquidated, the demand for apartments wouldn't be near as great. Banks want peasants to pay always, and liquidating REOs doesn't accomplish that.
Truth, is it not also correct that simply qualifying for a 12-month lease in a given rental situation ( multi-unit complex, stand-alone single-family home, condo, &c. ) is also becoming much more difficult, as lessors are employing rather strict qualification standards based upon FICO score and/or debt/income ratios ?
We are indeed witnessing -- some, unfortunately, first-hand -- the deconstruction, dollar by dollar, asset by asset, of the middle class.
Hey Don.
As far as the qualifying for a rental unit goes, it very much location AND property owner specific, as far as I know.
For instance, if one has rental units in Washington D.C. (or near the beltway corridor), they're going to be in a position to only accept top notch credit renters, period. The same is true of most areas in most areas within commuting distance of New York City's financial district (incidentally, these are the two modern day welfare queen areas, hands down, thanks to government largesse and raping of taxpayers - government bloat and bail-out kings).
There are pockets of other strong rental activity, too, like La Jolla & Newport Beach, CA, or Albuquerque, NM (where the government space and spy agencies built a bunch of trendy facilities - in Hatch's district in Utah, too, with the Skynet like NSA facility just funded).
But in many, many areas, landlords don't have a great bargaining position, and they are taking renters with less desirable FICO scores and lowering rents (or offering 2 or 3 months free rent, etc.) to get absorption up. Rents are also dropping in many areas of the country, which tends to get washed out when looking at the median and mean values.
I think it's safe to say landlords in many areas will take most renters, even with very bad credit, if they are currently working and can furnish proof of income...
These new units being built are either (a) being built because the existing apartment stock is relatively old (people like newer vs older, all things considered) and have newer amenities like in unit washers/dryers or 1 car garages (these are basically condos on slabs) in areas where the demand for rentals has picked up due to the mortgage crisis or (b) there are a ton of HUD/FHA non-recourse loans being provided through FHA/HUD intermediaries to loan to developers who want to build all subsidized or partially subsidized (20%+ of units in building) rental units, and even some of these loans can be tapped to build all for profit units, but the terms of the loan then change.
In any event, a portion of this uptick in multifamily (apartment) starts is for real, due to the mortgage/housing/economic crisis, and a portion of it is due to more government incentivization and subsidization, using taxpayer money, through non-recourse loans made available to developers with taxpayers bearing the ultimate risk, again (see my post on the next page, because in part, it's also a union 'gimme' by the Obama Administration under the Davis-Bacon Wage Act of 1931).
All in all, this is part deleveraging, as the middle class ownership society (that was part and parcel of a big, fractional reserve banking-enabled Ponzi, whereby credit was cocaine for the last 40 years, and credit was cheap crack cocaine for the last 18+ years, and part government-funding-and-subsidizing-yet-another-specific-asset) myth gets deconstructed by what will be years to be known as The Great Unwind.
A detailed, considered response, thanks -- and one which validates much of what I suspected regarding the rental market ( from the lessor's/landlord's perspective ).
I know that over ten years ago ( late- '90s ), when I was renting in the Boston metro area, debt/income ratios were absolutely employed ( for many higher-quality complexes and some condos ) for screening even then; periodically, I will Google some of the old stomping grounds, and nothing has changed -- including the high rates. I agree that it depends entirely upon the landlord, and of course, the supply-demand equation. I know of several former colleagues who were relocated elsewhere in the country, were unable to sell their homes quickly, and have settled in to the title of "landlord," renting out their single-family dwellings. I suspect that unsold homes ( i.e., "necessity" ) represent a fair quantity of single-family and perhaps condo rental stock; single-family as a pure, dedicated income/investment play, not so much.
Hey, this is my territory. Yeah, I have been tearing it up in the multifamily space for about a year and it just took another jump higher. Developers that have been sitting on the sidelines for 2-3 years finally got the waive from banks and there is an explosion of this contstruction now in Texas. Assisted Living places are popping up all over the place thanks to your future tax dollars funding grants.
Multi-family starts are very volitile however.
Texas, although now meeting resistance and turbulence (with the possible hotspot of Austin still booming), is a whole 'other country, though, to be fair, no?
And please do correct me if I'm wrong. I've been there about a half dozen times to observe and report back to my handlers, but I will be the first to concede that I never fully understood the Texas dynamics other than the oil & energy trade was helping Texas resist the downturn (even though it was never extended the taxpayer teat as D.C./Virginia/Maryland & NYC were).
We are mostly stealing jobs from elsewhere. My best guess is low taxes bring all kinds of business here but oil doesnt hurt. Single family housing is down about 40% in my main markets - Houston, Dallas/Ft Worth / Austin - so we're not exactly where we once were. The multifamily work has been nice though.
The multifamily occupancy rates are about 92%, 88%, and 94% for Dallas, Houston, and Austin, respectively. Thats pretty much full up. Rentals are doing well.
I agree that the inventory overhang will hit prices at some point but most of it is in the lower end. We have the Houston Association of Realtors here which shows all the REO properties and its concentrated on the east side of town. The oil business has people flocking here - Exxon Mobil moving all US employees to Houston for example - and they are well paying jobs. Its the kids coming out of school now that will never buy a house - all they have ever heard is that housing prices fall and its a bad investment. Therefore, apartments are were the demand is for the foreseeable future.
They're tearing down the foreclosed houses in my neighborhood. The excavators run from sunup-sundown.
8:00AM, residence. 5:00PM, muddy smear in the ground.
That's bull-dozer-ish!!!
I trust it is the banks doing the demolition, no?
If so, than it is another signifigant element to the wealth transfer story..
Destroy the (public) tax revenue producing aspect of the underlying.. transfer the loss to the government through write-offs and bailouts,, keep the durable aspect - the land.
I would guess it wasn't the banks doing the demo... my guess the culprit is abatement laws... I can't fathom how the bank wouldn't have to recognize the loss when the building gets destroyed. Seems the most reasonable thing to do is sell it when the city starts complaining about the condition/habitability...
At that point, they would take a marginal loss on the demo (demo cost > salvage value)... doesn't make sense.
Of course, you're right that in bailoutnation, businesses have perverted incentives...
The National Association of Realtors should be prosecuted under the RICO Act.
As a possibly somewhat irrelvant data point, I offer the sinlge family housing my daughter and son-in-law are looking at in the Naples, FL area. Now, I know that things were particulalry inflated there and that they indeed have seen a dramtic percentage drop due to the bubble bursting.
But, it's still $200+ per square foot and the 3-4BR 2-3 bath is about +100K or more that over here Southeast Florida.
And it's not like Southwest Florida is a mecca of industry - clean or otherwise.
Oh - therefore I agree ;-)
Pete
The National Association of Realtors should be prosecuted under the RICO Act.
Your multiple postings of this are annoying.
Your right about that one. They just said on the news that banks were razing scores of houses because no one was buying and they were tired of holding onto the liability...
Well shit, no ones buying your [banks] STILL over-priced POS house that you've let become an eye-sore because you have to many properties to 'care' for...
are these numbers based on permits pulled, not actuall ground breaking or closings? i am in middle river maryland, baltimore county...there are currently 6 new housing developments underway.....there are only models built, but i assume that if a devolpment has the potential of a 100 homes, is this not counted as a 100 starts although they will never be built.....also i cannot imagine this money being invested is private capitol, at risk, but some gauranteed form of taxpayer support were tails they win and heads we lose....build it and they will..never mind
Property values are falling and property taxes are rising. Real estate is a sitting duck target for the taxman. It is obscene.
On a side note, around here they are building a bunch of multi-unit, age 60+ government subsidized apartment buildings. One of the projects has started a new building with 80+ units every year for the last four years. These are for low income, social security only income type seniors. Government pays about half the market rent for these units, seems to be a growth market. I always thought they should move these people into the giant abandoned dormitories you will find on most major college campuses, let college kids get hands on training taking care of the baby boomers.
The National Association of Realtors should be prosecuted under the RICO Act.
I don't know why anyone would junk FEDbuster.
The property tax racket is one of the biggest scams going.
If you own real estate, you have to pay for services, some of the most expensive ones managed by a woefully inefficient government entity, such as public schools, even though you may have no children, hence not even utilize that service, and to add insult to injury, if you do have children, you may choose to send them to private schools (if you're fortunate enough to be able to) or homeschool them, to keep them away from the drugs, gangs, promiscuity and general filth that is omnipresent in those hallowed institutions of lowest common denomination.
It's all about the difference in Titles. How many ZH readers would prefer an allodial title?
http://en.wikipedia.org/wiki/Allodial_title
It's my understanding that the states who do issue them, very seldom do.
But ... holding inventory off the market is the only way to play like we should be building anything. Are we coping China's theory of building for demand that doesn't exist? The backlog of foreclosure does have to go through. Insolvency is a bitch.
I'd say more like 1998 price levels, a reversion to the long term trend.
The National Association of Realtors should be prosecuted under the RICO Act.
Actually, in some area's of California the 1981 prices are getting close. A condo that sold for 120K new in 1984 are now selling for 140K. I know as I inherited one and will be selling it. I hate condo's and HOA's.
Looking at the government data is just too painful anymore. We all know damn well there is no economic activity taking place in this country. They are playing us for fools.
And we are buying it by god. Hell, I have been watching the data coming out and have increased my bullish bets and decreased hedges & shorts. The worst part about the whole thing is that based on the markets reaction, others are being fooled too. I have actually been profiting from this so called recovery. I feel like such a schmuck.
The National Association of Realtors should be prosecuted under the RICO Act.
more hocus-pocus. the entire new york city region is loaded with empty warehoused dwellings - from those for sale, to those for rent. there is NO shortage of empty rentals - or people wanting them. it's more lies from the housing industry - the new 'logic' is - since nobody wants to buy anymore, there will be big demand for rentals. let them build more rentals - good for me. more empty propertys keep the prices down.
the solution is going to be import 10 million people from each of china and india to fill the housing. watch. just lovely.
President: We have a problem. There are so many empty properties. It is keeping a lid on prices. It is causing consumers to feel less wealth effect, I mean this is what Bernanke says is causing consumers to stop spending at the malls.
Faceless Advisor: We could change the immigration laws. Allow the wealthy to flee Iraq, Iran, Russia, China etc. They can repatriate all those US dollars we spent starting wars, paying warlords. This will solve a few things - Housing glut, weak dollar, poor economy, growing BRIC strength (All their dynamic people will flee). Our little wipping boy in Australia, I mean our experiment, has done this years ago. This is why their housing is the most expensive in the world. They have not had a recession in 20 years.
rooms for rent
fifty cents, no phone, no food, no pets..I ain't got no cigarettes. I smoke old stoggies I have found, short, but not to big around, I'm a man of means by no means- King of the Road!
New National Anthem?
May I also suggest:
I'm going home and when I wanna go home
I'm going mobile
I'm gonna find a home and we'll see how it feels
Going mobile
Keep me moving
Keep moving
Keep moving
I don't care about pollution
I'm an air-conditioned gypsy
That's my solution
Watch the police and the tax man miss me
I'm mobile
I'm mobile
Going Mobile, The Who
Perception > reality.
HFT bots - Santa is here, and he's ready to get his rally on!
BTW, if you're keeping score at home, this is the fourth trading day in a row with a pre-market gap up.
Totally reasonable. (Yes, that is sarcasm.)
As the sign at your local pub says - "Free Beer - Tommorrow"
I thought the HFT just exaggerate whatever the market does, no one wants in on this market so they are just going to push it further down
I hope its immediately faded. Im real sick of these lipstick on the pig data dumps.
Bet ya it doesn't exceed +135 on the Dow all day... The hopium is wearing off faster and faster these days... The junkie needs better drugs...
DOH!
lol shiiit maan... Regardless im sure the Tylers are right about it not lasting more than a day...
Yeah... sorry I couldn't resist, it was teed up too well. It'll go down soon enough.
Most overnight gap ups in this December have sold off during the day, but we all know how far and how fast this market can rise when its being fully jumped.
Sick of a market increases that make no sense or have a basis in reality?
If so, then you might want to load up on the pepto. I agree with the article in the sense the rally is upon us. I just believe it is going to last a lot longer than thru Christmas. I just don't see where else money can go except PMs. Interest rates are zip forever and QE(n) is coming so I'm guessing it will soon be off to the races. Maybe DOW14K?
Does this mean anything to the prosperity of most Americans? No. Matter of fact, the rise in the market will most likely track a decline in the real standard of living. Sad times SheepDog. Really sad times.
Good pop for the hedgies to start their redemption selling.
They should have at least waited a half an hour before they started dumping into it
yahoo finance headline: "Housing starts surged to a 1-1/2 year high in November and permits for future construction were the highest since March 2010 as demand for rental apartments rose, offering hope for the weak housing market. "
folks, doesnt get much funnier than that.
No shit. Time to invest in section 8 housing units. Won't be long until they are chopping up all the McMansions into multi-units. Seems silly to think it could happen, but I'll bet that's what people thought 100 years ago about all the beautiful Victorians in just about every city in the US.
Where I live, they have spent the last 10-15 years converting those beautiful Victorians back into single family homes... just in time... to divide them back up again. They are beautiful homes (with tiny little closets).
The National Association of Realtors should be prosecuted under the RICO Act.
That is the most insightful comment I have heard in months. In Australia, the last housing boom was over 100 years ago, and they did the same thing back then.
We have not had a property collapse yet, but I reckon you might have an idea. I will lobby the council to be able to split Australian McMansions. Most have 4 Bathrooms.. Just need to add another kitchen upstairs!
investors aren't interested in gold because it isn't backed by anything. The dollar is backed by the federal reserve.
"Investors aren't interested in gold because it isn't backed by anything."
God, that's funny. This has to be my all-time favorite ZH quote. I promise, i will use this over and over again, forever.
I'm so tired of gold I'm thinking of tossing my krugerrands in the dumpster behined Wendy's.
gold is too heavy. Better to unload the heavy stuff first.
I'm willing to dispose of all gold waste for a small fee.
Which Wendy's?
The thinking goes: gold is dangerous because it isn't backed by institutional power, like the dollar is. They're assuming institutional power is more reliable than gold, which they're likely predisposed to do because these people are major beneficiaries of institutional power.
She said it on TV so it must be true! http://www.youtube.com/watch?v=9fzO_YhOYNQ
If they use the substitution bias as they do in calculating inflation then I would expect a new boom market in housing once they start to count all the tents, vans and cardboard boxes down by the river.
That is funny. Not as funny as Italy giving money to the IMF to assist in the bailout of Italy, but still funny.
'the US Department of Truth' & 'knows are nothing but inventory padding by homebuilders who "build just to build."
US = a round eyed China.
The National Association of Realtors should be prosecuted under the RICO Act.
voices tell me I should wear a thong...
That be you Sheri from next door with the big picture window ? What your hearing is my telepathic signals and it's important that you follow them.
QE3 off...'til after the holiday. Can't have a down week when its Christmas.
Keep the "wealth effect" vibe going through New Years? Trap people into thinking, maybe the market will keep rising, no need to take losses now?
Funny. Adults moving into multi-family homes just confirms middle class desperation and poverty, yet the algos believe this is good news.
Also, do algos realize homes are depreciating assets?
Better than moving back into Mom and Dad's basement.
Isn't that just a split-level multi-family home then?
More like a bad case of the "Subterranean Homesick Blues".
The National Association of Realtors should be prosecuted under the RICO Act.
builders that 'build just to build.' makes em sound like they're bad.
i sometimes have 'sex just to have sex.' but i don't necessarily want to live with em either.
The Santa Claus Rally™ is here! One day only! Don't miss out! Buy now or forever hold your peas!
According to Yahoo housing is turning around:
22-year-old buys $88 million apartment