Addressing the “Housing Stock Debt”

The Census Bureau reported that single-family housing starts rose 2% in October to 936,000, and housing completions were 10.3% higher from September’s 1.13 million. 

“Construction activity reflected elevated home builder sentiment, which reached a 20-month high in October,” said realtor.com’s Senior Economist, George Ratiu. 

Building permits rose in October to 1.46 million, which is 5% higher than the September rate of 1.39 million and a 14% increase from the October 2018 rate of 1.28 million. 

First American Financial Corporation Chief Economist Mark Fleming noted low mortgage rates, rising household income, and a surge of millennials had boosted the demand for housing. Fleming, though, said inventory would continue to be an issue. 

“However, we have underbuilt new housing relative to demand for years. Building will have to exceed household formation for a number of years to reduce the housing stock ‘debt’ we have accumulated,” Fleming said. 

Fleming said First AM expects strong housing demand to continue and construction to accelerate in 2020, which “may help alleviate some competition in the market.” 

The Northeast was the only region in the nation that recorded a month-to-month decline in housing starts, falling 21.9%. The Midwest region grew by 8.7%, the South rose by 0.7%, and the West rose by 17.6%. 

BuildFax’s Housing Health Report echoed the Census Bureau’s sentiment, reporting single-family authorizations rose 2.33% year-over-year, and the existing-housing maintenance volume rose 6.08% annually. 

“Last November, housing activity experienced the first instance of blanket declines since 2011, when the economy was still recovering from the 2008 recession. Almost a year following November’s declines, we’re now seeing blanket increases,” said Jonathan Kanarek, Managing Director of BuildFax. “In light of the recent upswing in housing activity, it’s likely the 2019 housing slide was a stabilization of a white-hot market. This is, of course, further bolstered by a strengthening economy that recently experienced interest rate cuts, steady wage growth, and a reversion in the yield curve.”

BuildFax’s report added that October report marks the one-year anniversary of the Camp Fire—the most destructive wildfire in California’s recorded history. The report found that new construction rose 94.34% since the Camp Fire impacted Butte County.