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Housing completion data is now savagely unhealthy

At the peak of 2005, we had about 2.24 million housing completions in the monthly report. Today, we are at 1.342 million.
The post Housing completion…

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Housing construction in the U.S. during the brief COVID-19 recession, to that recovery, and now in the new housing recession, is going to go down in history as one of those crazy data lines we lived through. Just to give you some perspective here, at the peak of 2005, we had about 2.24 million housing completions in the monthly report. Today, even with over a decade of building growth, we are at 1.342 million.

The latest Census report shows that in August, privately owned housing completions were 5.4% below the revised July estimate of 1.419 million, but 3.1% above the August 2021 rate.

As you can see below, this chart speaks volumes, and trust me when I say this: the builders are going to take it nice and slow on completions until they know they can sell 9.84 months of homes they have under construction or have not even started yet.

Ladies and gentlemen, welcome to the savagely unhealthy housing market.

Now that mortgage rates have spiked up so much, the housing construction growth we have seen in single-family construction is done. It was a good run and we have legs to go lower in single-family construction until rates fall again.



In this report, housing permits did fall, coming in 10% under the July level and 14.4% below the August 2021 level. This shouldn’t be shocking considering new home sales are falling and monthly supply has spiked for the builders. People have to remember that the builders are here to make money, not to build more homes for the existing home sales market. That market represents their biggest competition, and it’s an army they add to every time they sell a house. Since new homes are more expensive than existing homes, they have to manage their supply according to demand.



My rule of thumb for anticipating builder behavior is based on the three-month average of supply:

  • When supply is 4.3 months and below, this is an excellent market for the builders.
  • When supply is 4.4 to 6.4 months, this is just an OK market for the builders. They will build as long as new home sales are growing.
  • The builders will pull back on construction when the supply is 6.5 months and above. 

I will get more bullish on housing starts, permits, and completion data once the monthly supply data for new homes is below 6.5 months and new home sales are growing. We are clearly not there at all. Per the last report, we are standing at 10.9 months — and only 1.06 months of that supply is a finished product.

  • 7.33 months of supply is under construction
  • 2.51 months of supply hasn’t even been started yet

Another big difference between now and the peak of the housing bubble is that new home sales were roughly at 1.4 million at the peak, and now the last print is at 511,000. No sales credit boom, no major sales credit bust.

You can really see this in the purchase application data, which is already below 2008 levels today. During the housing bubble years, sales, starts, permits and completions data all moved together in a boom and then a bust. Not the case this time around as we haven’t seen the kind of booming sales market like we saw from 2002-2005.

Housing starts did pick up in this report, but revisions were negative. Again, the monthly reports can swing wildly, but the trend is always your friend. Multifamily construction has held up very well in 2022, while single-family weakness continues. We had a small pick-up in single starts coming off a negative revision print, so some context with that data line.

All in all, we should not be surprised at this housing starts report. As rates keep rising, more and more pressure will be added to the single-family starts data, which can fall a lot more as long as the builders are dealing with their excess supply.

Back in March of this year, when I wrote that the business model for the builders was at risk, this is what I meant. If they can’t sell their product at the prices they want, they will stop building single-family homes until they feel comfortable building again. 

We had this happen in 2018: when rates got to 5%, monthly supply spiked above 6.5 months and the builders paused on construction for about 30 months. However, rates quickly fell in 2019 to stabilize the market place.

That isn’t the case here, as rates keep rising and are much higher than 5%. It’s a much different backdrop for housing, especially after the massive home-price gains since 2020. One thing is for sure, the savagely unhealthy housing market continues. 

The post Housing completion data is now savagely unhealthy appeared first on HousingWire.

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Government

Biden’s Secret Promise To OPEC Backfires: Shellenberger

Biden’s Secret Promise To OPEC Backfires: Shellenberger

Submitted by Michael Shellenberger,

In early September, United States Secretary of…

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Biden's Secret Promise To OPEC Backfires: Shellenberger

Submitted by Michael Shellenberger,

In early September, United States Secretary of Energy, Jennifer Granholm, told Reuters that President Joe Biden was considering extending the release of oil from America’s emergency stockpiles, the Strategic Petroleum Reserve (SPR), through October, and thus beyond the date when the program had been set to end. But then, a few hours later, an official with the Department of Energy called Reuters and contradicted Granholm, saying that the White House was not, in fact, considering more SPR releases. Five days later, the White House said it was considering refilling the SPR, thereby proposing to do the exact opposite of what Granholm had proposed.

The hand of Russia's President Vladimir Putin (right) is now strengthened within the OPEC+ cartel controlled by Saudi Arabia's Crown Prince Mohammed bin Salman (left), which today decided to cut production by 2 million barrels.

The confusion around the Biden administration’s petroleum policy was cleared up yesterday after a senior official revealed that the White House had made a secret offer to buy up to 200 million barrels of OPEC+ oil to replenish the SPR in exchange for OPEC+ not cutting oil production. The official said the White House wanted to reassure OPEC+ that the US “won’t leave them hanging dry.” The fact that this offer was made through the White House, not the Department of Energy, may explain why a representative of the Department called Reuters to take back the remarks of Granholm, who has shown herself to be out-of-the-loop, and at a loss for words, relating to key administration decisions relating to oil and gas production.

The revelation poses political risks for Democrats who, in the spring of 2020, killed a proposal by President Donald Trump to replenish the SPR with oil from American producers, not OPEC+ ones, and at a price of $24 a barrel, not the $80 a barrel that the Biden White House promised to OPEC+. At the time, Trump was seeking to stabilize the American oil industry after the Covid-19 pandemic massively reduced oil demand. Trump and Congressional Republicans proposed spending $3 billion to fill the SPR. Senate Democratic Leader Chuck Schumer successfully defeated the proposal, and later bragged that his party had blocked a “bailout for big oil.”

Even normally strong boosters of the Biden White House viewed the Democrats’ opposition to refilling the SPR as a major blunder. “That decision,” noted Bloomberg, “effectively cost the US billions in potential profits and meant Biden had tens of millions of fewer barrels at his disposal with which to counter price surges.” Moreover, observed Bloomberg, it will take significantly more oil today to fill the SPR than it would have two years ago. In spring 2020, the SPR contained 634 million barrels out of a capacity of 727 million. Now, the reserve is below 442 million barrels, its lowest level in 38 years.

The decision looks even worse in light of the decision by OPEC+ today to cut production, which will increase oil prices. The Biden administration in recent days has been pulling out the stops trying to persuade Saudi Arabia and other OPEC+ members, a group that includes Russia, to maintain today’s levels of oil production. Last Friday, the Biden administration sought a 45-day delay in a civil court proceeding over whether Saudi Arabia’s Crown Prince Mohammed bin Salman should have sovereign immunity for the murder of Washington Post columnist Jamal Khashoggi, for which bin Salman has taken responsibility.

The behavior by the Biden White House displays a willingness to sacrifice America’s commitment to human rights for the president’s short-term political needs. Instead of pleading with OPEC+ to maintain or increase high levels of oil production, the Biden administration could have simply allowed for expanded domestic oil production. Instead, Biden has issued fewer leases for on-shore and off-shore oil production than any president since World War II. As such, the pleadings by Biden and administration officials have backfired. The perception of the U.S. in the minds of OPEC+ members has weakened while the influence of Russian President Vladimir Putin has strengthened.

Why is that? Why did the Biden administration decide to spend so much political capital trying, and failing, to get Saudi Arabia and other OPEC+ members to expand production when it could have simply expanded oil production domestically? What, exactly, is going on?

President Joe Biden greets the Saudi Crown Prince on July 15, 2022.

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Tyler Durden Thu, 10/06/2022 - 22:20

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Government

What Really Divides America

What Really Divides America

Authored by Joel Kotkin via UnHerd.com,

The Midterms aren’t a battle between good and evil…

Reading the…

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What Really Divides America

Authored by Joel Kotkin via UnHerd.com,

The Midterms aren't a battle between good and evil...

Reading the mainstream media, one would be forgiven for believing that the upcoming midterms are part of a Manichaean struggle for the soul of democracy, pitting righteous progressives against the authoritarian “ultra-MAGA” hordes. The truth is nothing of the sort. Even today, the vast majority of Americans are moderate and pragmatic, with fewer than 20% combined for those identifying as either “very conservative” or “very liberal”. The apocalyptic ideological struggle envisioned by the country’s elites has little to do with how most Americans actually live and think. For most people, it is not ideology but the powerful forces of class, race, and geography that determine their political allegiances — and how they will vote come November.

Of course, it is the business of both party elites — and their media allies — to make the country seem more divided than it is. To avoid talking about the lousy economy, Democrats have sought to make the election about abortion and the alleged “threat to democracy” posed by “extremist” Republicans. But recent polls suggest that voters are still more concerned with economic issues than abortion. The warnings about extremism, meanwhile, are tough to take seriously, given that Democrats spent some $53 million to boost far-Right candidates in Republican primaries.

Republicans are contributing to the problem in their own way, too. Rather than offering any substantive governing vision of their own, they assume that voters will be repelled by unpopular progressive policies such as defunding the police, encouraging nearly unlimited illegal immigration, and promoting sexual and gender “fluidity” to schoolchildren. They ignore, of course, the fact that their own embrace of fundamentalist morality on abortion is also widely rejected by the populace. And even Right-leaning voters may doubt the sanity of some of the GOP’s eccentric candidates this November.

In short, both major parties stoke polarisation, the primary beneficiaries of which are those parties’ own political machines. But most Americans broadly want the same things: safety, economic security, a post-pandemic return to normalcy, and an end to dependence on China. Their divisions are based not so much on ideology but on the real circumstances of their everyday life.

The most critical, yet least appreciated, of these circumstances is class. America has long been celebrated as the “land of opportunity”, yet for working and middle-class people in particular, opportunity is increasingly to come by. With inflation elevated and a recession seemingly on the horizon, pocketbook issues are likely to become even more important in the coming months. According to a NBC News poll, for instance, nearly two-thirds of Americans say their pay check is falling behind the cost of living, and the Republicans hold a 19-point advantage over the Democrats on the economy.

A downturn could also benefit the Left eventually. As the American Prospect points out, proletarianised members of the middle class are increasingly shopping at the dollar stores that formerly served working and welfare populations. Labour, a critical component of the Democratic coalition, could be on the verge of a generational surge, with unionisation spreading to fast food retailers, Amazon warehouses, and Starbucks.

To take advantage of a resurgent labour movement, however, Democrats will have to move away from what Democratic strategist James Carville scathingly calls  “faculty lounge politics”: namely, their obsession with gender, race, and especially climate. For instance, by demanding “net zero” emissions on a tight deadline, without developing the natural gas and nuclear production needed to meet the country’s energy needs, progressives run the risk of inadvertently undermining the American economy. Ill-advised green policies will be particularly devastating for the once heavily Democratic workers involved in material production sectors like energy, agriculture, manufacturing, warehousing, and logistics.

To win in the coming election and beyond, Democrats need to focus instead on basic economic concerns such as higher wages, affordable housing, and improved education. They also need to address the roughly half of all small businesses reporting that inflation could force them into bankruptcy. Some progressives believe that climate change will doom the Republicans, but this is wishful thinking. According to Gallup, barely 3% of voters name environmental issues as their top concern.

Racial divides are also important — though not in the way that media hysterics about “white supremacy” would lead you to believe. Florida Governor Ron DeSantis’s decision to fly undocumented immigrants to Martha’s Vineyard was undoubtedly a political stunt, and one arguably in poor taste. But it succeeded in its main goal: highlighting the enormous divide between the border states affected by illegal immigration and the bastions of white progressivism who tend to favour it.

Under Biden, the Democrats have essentially embraced “open borders” — illegal crossings are at record levels, and few of the migrants who make it across the border are ever required to leave. This policy reflects a deep-seated belief among elite Democrats that a more diverse, less white population works to their political favour. Whether they are right to think so, however, is far from clear. Black people still overwhelmingly back the Democrats, but Asians (the fastest-growing minority) and Latinos (the largest) are more evenly divided, and have been drifting toward the Republicans in recent years.

Here, too, class is a key factor. Many middle and upper-class minorities are on board with the Democrats’ anti-racist agenda. But many working-class Hispanics and Asians have more basic concerns. After all,  notes former Democratic Strategist Ruy Teixiera, these are the people most affected by inflation, rising crime, poor schools, and threats to their livelihoods posed by draconian green policies.

Culture too plays a role. Immigrants, according to one recent survey, are twice as conservative in their social views than the general public and much more so than second generation populations of their own ethnicity. Like most Americans, they largely reject the identity politics central to the current Democratic belief system. Immigrants and other minorities also tend to be both more religious than whites; new sex education standards have provoked opposition from the Latino, Asian, African American and Muslim communities.

The final dividing line is geography, always a critical factor in American politics. For decades, the country seemed to become dominated by the great metropolitan areas of the coasts, with their tech and finance-led economies. But even before the pandemic, the coastal centres were losing their demographic and economic momentum and seeing their political influence fade. In 1960, for example, New York boasted more electoral votes than Texas and Florida combined. Today, both have more electoral votes than the Empire State. Last year, New York, California, and Illinois lost more people to outmigration than any other states. The greatest gains were in Florida, Texas, Arizona, and North Carolina. These states are high-growth, fertile, and lean toward the GOP.Likewise, regional trends suggest that elections will be decided in lower density areas; suburbs alone are  home to at least 40% of all House seats. Some of these voters may be refugees from blue areas who still favour the Democrats. But lower-density areas, which also tend to have the highest fertility rates, tend to be dominated by family concerns like inflation, public education and safety, issues that for now favour Republicans.

Put the battle between Good and Evil to one side. It is these three factors — class, race, geography — that will shape the outcome of the midterms, whatever the media says. The endless kabuki theatre pitting Trump and his minions against Democrats may delight and enrage America’s elites — but for the American people, it is still material concerns that matter.

Tyler Durden Thu, 10/06/2022 - 21:40

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International

Switzerland, Not USA, Is The ‘Most Innovative’ Country In The World

Switzerland, Not USA, Is The ‘Most Innovative’ Country In The World

The World Intellectual Property Organization (WIPO) has released its 2022…

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Switzerland, Not USA, Is The 'Most Innovative' Country In The World

The World Intellectual Property Organization (WIPO) has released its 2022 Global Innovation Index. It evaluated innovation levels across 132 economies focusing on a long list of criteria such as human capital, institutions, technology and creative output as well as market and business sophistication, among others.

The 2022 index has found that innovation is still blossoming in some sectors despite the global economic slowdown and coronavirus pandemic, especially in industries to do with public health and the environment.

As Statista's Katharina Buchholz reports, Switzerland topped the rankings with a score of 64.6 out of 100, the 12th time it has been named the world leader in innovation. The United States come second while the Sweden rounds off the top three.

You will find more infographics at Statista

One of the biggest winners of the ranking was South Korea, which climbed up from rank 10 in 2020 to rank 6 in 2022.

China is now the world's 11th most innovative nation, up from rank 14 in 2020 and 2019 and rank 17 in 2018.

China was also named the most innovative upper middle-income country ahead of Bulgaria (overall rank 35), while India (overall rank 40) came first for lower middle-income countries, followed by Vietnam (overall rank 48).

Notably, China is now on a par with the United States in terms of the number of top 100 Science & Technology clusters

Finally, WIPO notes that on the one hand, science and innovation investments continued to surge in 2021, performing strongly even at the height of a once in a century pandemic. On the other hand, even as the pandemic recedes, storm clouds remain overhead, with increasing supply-chain, energy, trade and geopolitical stresses.

Tyler Durden Thu, 10/06/2022 - 20:40

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