Housing Starts Surge to a 13-Year High Thanks to Massive Seasonal Adjustments

Mish

Seasonally-adjusted housing starts jumped 19.9% to a 13-year high. Housing permits fell 3.9%

Seasonal-adjustments, coupled with an exceptionally warm December, and a surge in multi-family construction, especially in the Midwest led to a reported overall surge in housing starts.

The Census Department's New Residential Construction report has the details.

Housing Starts

Privately‐owned housing starts in December were at a seasonally adjusted annual rate of 1,608,000. This is 16.9 percent above the revised November estimate of 1,375,000 and is 40.8 percent above the December 2018 rate of 1,142,000. Single‐family housing starts in December were at a rate of 1,055,000; this is 11.2 percent above the revised November figure of 949,000. The December rate for units in buildings with five units or more was 536,000.

Building Permits

Privately‐owned housing units authorized by building permits in December were at a seasonally adjusted annual rate of 1,416,000. This is 3.9 percent below the revised November rate of 1,474,000, but is 5.8 percent above the December 2018 rate of 1,339,000. Single‐family authorizations in December were at a rate of 916,000; this is 0.5 percent below the revised November figure of 921,000. Authorizations of units in buildings with five units or more were at a rate of 458,000 in December. An estimated 1,368,800 housing units were authorized by building permits in 2019. This is 3.9 percent above the 2018 figure of 1,317,900.

Housing Completions

Privately‐owned housing completions in December were at a seasonally adjusted annual rate of 1,277,000. This is 5.1 percent above the revised November estimate of 1,215,000 and is 19.6 percent above the December 2018 rate of 1,068,000. Single‐family housing completions in December were at a rate of 912,000; this is 0.7 percent above the revised November rate of 906,000. The December rate for units in buildings with five units or more was 357,000. An estimated 1,250,600 housing units were completed in 2019. This is 5.6 percent above the 2018 figure of 1,184,900.

Housing Starts Seasonally Adjusted

Housing Starts Not Seasonally Adjusted

Massive Seasonal Adjustments

  • Not-adjusted housing starts rose from 103.1 to 108.5. This was reported at a seasonally-adjusted rate of 1,608 and a rise of 16.9%.
  • ​Not-adjusted single-family housing starts fell from 68.7 to 68.6. This was reported at a seasonally-adjusted rate of 1,055 and a rise of 11.2%
  • In the Midwest region, not-adjusted housing starts rose from 14.8 to 14.9. This was reported at a seasonally-adjusted rate of 254, and a rise of 37.3%.
  • In the Midwest region, not-adjusted single-family housing starts rose from 9.2 to 9.6. This was reported at a seasonally-adjusted rate of 180, and a whopping rise of 56.5%.

Actual Year-Over-Year Comparisons

  • The December 2018 to December 2019 actual year-over-year change in housing starts was up 3.2%.
  • The actual change in single-family units year-over-year was a mere 1.4%.
  • Year-over-year single-family construction fell 11.9% in the Northeast, 2.0% in the Midwest, and 3.8% in the West. The South saved the day, up 6.6%.

Seasonal Adjustments Gone Haywire

The seasonal adjustments went completely haywire in this report because of an exceptionally mild December, especially in the Midwest.

When I first saw the headline number I thought bond yields would be soaring through the roof. Instead, the 10-year note rose a mere 2 basis points.

Then a dive into the actual report confirmed the headline numbers are not what they seem to be.

Mike "Mish" Shedlock

Comments (9)
No. 1-5
Zardoz
Zardoz

Woo hoo! More houses nobody can afford to live in!

Tony Bennett
Tony Bennett

"coupled with an exceptionally warm December,"

...

End of story.

Federal Reserve Industrial Production report (December) out this morning validates -

"The drop for utilities resulted from a large decrease in demand for heating, as unseasonably warm weather in December followed unseasonably cold weather in November."

Six000mileyear
Six000mileyear

The Federal Reserve is looking for an excuse to raise rates. After 3 rate cuts, the 10 yr Treasury yield has hardly budged.

I'm Buck
I'm Buck

Where I live in southern California it's a mad dash to complete projects and not much on the books to add new tracks. I have been in the heavy earth moving side of businesses for the past 25 years.

Flic1
Flic1

I live on the west coast of FL and it is crazy what is going on here. The amount of new houses being built on every single parcel of vacant land is insane. Wawa's, strip malls, car washes, Dunkin Donuts, etc being built on every corner. Road construction everywhere you look and even construction workers are buying $600k+ houses in my neighborhood. I know a commercial realtor that just bought a jet. This has far surpassed what what was happening in 05-06 (with the exception of people camping out in driveways to bid on houses) and I'm not sure when this all stops...but it will likely end in tears again. The Fed has created another monster. I am surprised it has gotten like this to be honest but you can never underestimate how much cheap, easy money can be borrowed and spent.

Mish - BTW, long time reader since early housing bubble days (2005?)....I was renting and laughed at/mocked for years when we first moved to FL in 2004 but bought a new house in early 2012 nailing the bottom to the month..at least where we are....thanks for all your informative commentary over the years.


Global Economics

FEATURED
COMMUNITY