by Bill McBride on 10/17/2012 08:24:00 PM
Wednesday, October 17, 2012
A couple of articles on housing:
An interesting comment via Nick Timiraos at the WSJ: Why Housing Construction Is Rebounding
Gains in construction should lift the economy. Glenn Kelman, chief executive of real-estate brokerage Redfin, writes in an op-ed at Quartz that builders have been completing “half-built projects” with “skeleton crews” for much of the past year. That hasn’t done too much for job growth. “It takes fewer cooks to prepare leftovers for dinner,” he writes.This could be part of the reason that construction employment is lagging, but I also think we will see upward revisions (the preliminary benchmark revision indicated a fairly large upward revision for construction employment). The construction jobs are coming ...
And from Neil Irwin at the WaPo: September figures may provide signs of a housing recovery
First, it helps to understand how deep, and sustained, this housing depression has been. Residential investment — essentially, housing construction and sales activity — has been below 3 percent of gross domestic product every quarter since the fourth quarter of 2008, closing in on four years. Before this downturn, it had never fallen below 3 percent for even a single quarter (the data go back to 1947).Here is a graph to go along with Irwin's article:
Here’s the thing, however: The overbuilding of houses during the boom years, while real, was not extraordinary by historical standards. The underbuilding of houses has been far greater than the excess housing construction during the boom relative to demographic trends.
... other factors are probably major culprits in the housing weakness of the past four years: A terrible job market that has made people unwilling or unable to get a mortgage, an overhang of foreclosures that has kept the market for houses from clearing and extreme caution by banks and other lenders that has made it hard to get mortgages.
Now each of those trends seems to be healing.
Click on graph for larger image.
Here is a graph of residential investment (RI) as a percent of GDP. Currently RI is 2.4% of GDP; just above the record low. I expect RI to recover back towards 4% of GDP over the next few years giving a boost to GDP and employment.
• At 8:30 AM, the initial weekly unemployment claims report will be released. The consensus is for claims to increase to 365 thousand from 339 thousand. Look for a larger than normal upward revision to last week's report (apparently one large state was late with their quarterly filing).
• At 10:00 AM, the Philly Fed Survey for October will be released. The consensus is for a reading of 0.5, up from minus 1.9 last month (above zero indicates expansion).
• Also at 10:00 AM, the Conference Board Leading Indicators for September will be released. The consensus is for a 0.2% increase in this index.
Another question for the October economic prediction contest (Note: You can now use Facebook, Twitter, or OpenID to log in).
Posted by Bill McBride on 10/17/2012 08:24:00 PM