Home construction rebounded in January 2018, though that may have been nothing more than statistical noise. Total permits filed to build new residential structures totaled 1.396 million (SAAR) last month, up from a revised 1.300 million in December. The entirety of that increase was due to a big jump in permits for the multi-family segment. This latter category consisting of apartment buildings is notoriously noisy especially on a month to month basis.
In it, permits were estimated to have been 479k (SAAR) in January 2018 compared to 382k in December. The latter number was more in line with the recent trend, which still appears to be lower overall. The multi-family segment has been a drag on the construction sector for several years now, despite the occasional spike up in either permits or starts, or both.
In single-family construction, both permits were lower and starts were higher in January both by negligible amounts. The issue here is never really plus or minus, by why growth isn’t far more strenuous and determined. The NAR’s figures for resales continue to suggest a multi-year trend of declining inventory and therefore suspect volume. If economic conditions overall are robust, as they are always described, home builders should have long ago stepped in to supply what we are told is highly demanded.
It’s not as if builders lack for confidence; far from it. According to the National Association of Home Builders (NAHB), they have been over the past few months rarely ever more confident than now. You have to go back to the late nineties for similar expressed levels of optimism; the NAHB’s index suggests that its members are more positive now than at any time during the housing mania.
The problem with that result is obvious; they aren’t building at a rate anywhere close to either the nineties or the height of the bubble. On a population-adjusted basis, the disparity is even greater.
Thus, we have to question what it is builders are confident about. Is it a cyclical, macro view of potential downside? That might make more sense given the peaks and valleys in the index. In other words, the longer expansions go the more builders are confident not about the volume of business but that whatever level of demand they are seeing won’t disappear tomorrow.
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