The unorthodox monetary stimulus from The Federal Reserve and stimulypto-level spending by the Federal government has resulted in a surge in US housing starts. But that thrill may be gone if the stimulypto is removed.
(Bloomberg) -By Olivia Rockeman- U.S. housing starts rose by more than expected in August, suggesting that the supply and labor constraints that have been holding back construction eased in the month.
Residential starts rose 3.9% last month to a 1.62 million annualized rate after an upwardly revised July print, according to government data released Tuesday. The median estimate in a Bloomberg survey called for a 1.55 million pace.
Building permits, meanwhile, increased 6% in August, the biggest gain since January, reflecting a sizable jump in multi-family units. Permit applications for single-family homes also edged higher.
The data suggest that builders are making some construction headway despite limited availability of land, labor and materials, which has slowed residential starts from a 15-year high in March. Despite the bottlenecks, housing starts remain mostly above pre-pandemic levels, which is expected keep construction activity elevated for some time.
1-unit (single family detached) starts got a tremendous jolt from The Fed’s monetary stimulus and Federal governments fiscal stimulus. But government stimulus wears out.
Given the high cost of housing in the USA, particularly in coastal metro areas, we see home price growth raging at over 4 times hourly earnings growth.
As a result, we are seeing a burst of 5+ unit (multifamily) housing starts. Note the burst of 5+ housing starts prior to Covid striking in early 2020.
Permits for 1-unit housing are up only slightly but 5+ unit permits are up 19.7%.
Remember, the withdrawal of fiscal stimulus will lead to a big fiscal cliff.