On Wednesday, with a bit of an assist from the Census Bureau's seasonalizers, the Associated Press's Derek Kravitz, with the help of Martin Crutsinger, covered the Bureau's just-published January data on housing starts and building permits. Though no one could accuse the AP pair of excessive cheerleading, they missed the most important comparison: How did January 2011 compare to January 2010? The answer: It was worse.
Here are key passages from their writeup:
Apartments pushed home construction up in January
Home construction rose at the fastest rate in 20 months, pushed up by a spike in apartment building. But construction of single-family homes declined, a sign that demand for housing remains weak. [1]
Builders broke ground on new homes and apartments at a seasonally adjusted annual rate of 596,000 units, a 14.6 percent jump from December.
Single-family homes, which make up nearly 70 percent of new construction, fell 1 percent to an annual rate of 417,000 units. [2] Multifamily construction, a more volatile category, skyrocketed 80 percent to an annual rate of 171,000 units.
Last year, builders worked on 587,600 new homes, just barely better than the 554,000 started in 2009. [3] ... The housing industry is coming off the worst two years for home construction dating back to 1959. [4]
... Michael Gapen, senior U.S. economist with Barclays Capital, said home building is unlikely to see a turnaround until builders can sell off most of the homes sitting idle on the market and there are fewer foreclosures to compete with.
Economists are watching the pace of multifamily construction, which includes housing with five or more units, to see if it continues to rise throughout 2011.
... Building permits, an indicator of future construction, fell more than 10 percent in January. Code changes in California, Pennsylvania and New York caused an artificial spike the month before. Builders in those states rushed to file new permits before those changes went into effect in the new year.
Notes:
- [1] -- This may seem like quibbling, but as you'll see, it's not. An "apartment" is not a "home." The Census Bureau refers to "housing units," which is the term the pair should have used. Readers can see how misleading the report's first phrase is when used in isolation (especially without the term "seasonally adjusted"), as I would think occurred in many radio and TV broadcasts throughout the country at AP-subscribing outlets.
- [2] -- Derek and Marty seemed impressed with the idea of reporting the best news in 20 months about seasonally adjusted total starts, but "somehow" missed the fact that seasonally adjusted single-family starts were the lowest since May 2009's figure of 406,000. That's also 20 months, guys. The raw number of 25,600 single-family starts (i.e., the not seasonally adjusted number, as in what really happened) is the third-lowest in any reported month in the 52 years related records have been kept.
- [3] -- AP's 2010 figure for starts is not correct. As shown here, it's 586,800, because November and December were both revised downward. AP did not mention any downward revisions. Also, the term "worked on" as a synonym for starts is incorrect, as it assumes that the only homes "worked on" were those that were started during 2010. What about the 495,400 homes that were under construction at the end of 2009? I'm pretty sure that builders didn't just snap their fingers and finish them without any effort.
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[4] -- Kravitz and Crutsinger, in quoting figures only for starts, are trying to imply that 2010 was a better year for the housing industry than 2009. It wasn't:
While permits and starts were up slightly, two much more important numbers, completions and sales, seriously tanked. Additionally the December 2010 figure of 410,700 homes under construction at the end of 2010 was 17% lower than the 2009's 495,400. Sorry, Derek and Marty, 2010 was easily the worst year in homebuilding -- not since 1959, which you are implying was even worse (which it wasn't), but since World War II.
Also worth noting, which Kravitz and Crutsinger didn't: January's total starts and permits trailed January 2010 by 2% and 9%, respectively. Completions, a number the press chooses to consistently ignore, were down by a stunning 24% (35,200 vs. 46,300) from January 2010.
Though the news on January new home sales is still pending, the Census Bureau's information to date tells us that the housing industry's 2011 started off even worse than 2010. That's the real story. It's not in the AP's coverage.
Cross-posted at BizzyBlog.com.
