Analyzing the Housing Shortage and Market Shifts | Episode 156 | 07-17-24

The latest episode of our podcast shines a light on the intriguing dynamics of the housing market, focusing on the contrasting trends between multifamily and single-family homes. In June, we witnessed some unexpected developments that could reshape the future of real estate. With a notable 3% increase in housing starts and an even more impressive 3.4% rise in building permits, the housing market is showing signs of life, but not without its complexities.

Megan unpacks the latest housing data, revealing a mixed bag for the market. While multifamily housing starts surged by nearly 20%, single-family homes declined, marking the fourth consecutive month of decreased starts. This divergence raises important questions about the sustainability of current trends and the broader economic implications.

One key point of discussion is the persistent shortage of single-family homes in the U.S. Despite the encouraging numbers for multifamily housing, the single-family sector remains in a slump. Building permits for single-family homes have also declined for five consecutive months, signaling potential challenges ahead. The episode explores the factors contributing to this shortage, including rising construction costs, labor shortages, and regulatory hurdles.

The rise in multifamily housing is not just a statistical anomaly; it reflects broader economic conditions. As mortgage rates pulled back slightly in June, housing activity had a corresponding uptick. However, this positive momentum was primarily confined to the multifamily sector. Megan examines how demographic shifts, such as the increasing preference for urban living and rental properties among younger generations, drive this trend.

Tune in!

The housing market is showing some signs of life everybody at least, for the month of June that is. We got this morning it is Wednesday, June the 17th, and we got the housing data, the housing starts and building permits for the month of June. Now, keep in mind in the month of June we did see a pullback in the mortgage rate, so we did see better activity in the housing market, which is good news. Housing starts came in better than expected. They rose 3% after declining the month prior, and the expectation was for them only to rise about 1.8%. So really good there from the Housing Start perspective. Now, building permits this is, building permits are more of an indication of future activity, so we do look at those as a leading indicator for housing, and building permits as well came in much better than expected. It was actually the first increase that we've seen in four months. The economists were looking for them only to rise 0.1%, but building permits rose 3.4%. So much better there.

Now what does this mean? Let's dig in a little bit into some of the details. So the housing data gets broken into single family and then multifamily starts, and we need single family homes. We do know that we have a shortage in this country with single family homes. Unfortunately, the starts were concentrated completely in the multifamily, so multifamily housing starts were up almost 20% for the month.

When you look at the single family homes, though, they've continued to decline. So for the month we were down for the fourth consecutive month, and then building permits doesn't tell a much better story for the single family homes. Building permits were actually lower as well for the month. They've declined now for the last five consecutive months, and you did see a big increase in the multifamily on a month-over-month basis for those permits. So again, more construction for multifamily units, but not for the single-family homes. So we would like to see a little bit better there from the single-family perspective.

That's all we have today. We'll be back tomorrow with one of our favorite economic indicators, the Leading Ind leading indicator index. I apologize, that has been something that we followed for a very long time. It tends to be a precursor to a recession, especially if you've seen significant periods of time that this has been negative. We will be back tomorrow to dig into those details and see how that has materialized, because the housing starts and housing data does have a component in that index, and if you have any questions, please feel free to reach out to podcast at verdence. com. Thank you.