Pop the champagne, folks! Fresh data from the Commerce Department says home construction is on the rise.
There are only two teensy little problems.
First, a surge in construction for January – the most trumpeted facet of this report – is being cast as great news that people are buying new homes. If an 80 percent rise in apartment buildings counts as buying a new home, then there you go. Pay no attention to the fact that construction for free-standing houses actually fell.
While this is great news for the suffering construction industry, it has nothing to do with home sales. In fact, this is bad news for banks. More and more Americans are giving up on home ownership and settling for apartment space. And while some of these new buildings will accommodate population growth, a jump to the tune of 80 percent means something else.
A large chunk of these new apartment dwellers will likely be folks who just abandoned an underwater mortgage. This means even more saturation in the existing home market and less chance for new home construction in the near future.
Speaking of home construction, we turn to the second major problem with the government’s figuring. Just a few weeks ago the Commerce Department flooded the media with good news about building permits. Take it away, CNN Money:
Permits for housing construction soared in December, while initial construction of homes declined, the government reported Wednesday.
“Last month didn’t look so hot for construction, but the future looks a lot better,” said Mike Larson, a housing industry analyst for Weiss Research…
“We’re seeing confidence creeping back into the market — and while we’re not ready to go nuts building yet, with jobs starting to improve I think that’s going to be a catalyst to get construction going,” said Larson.
The surge in apartment construction did in fact occur, but the decline in home construction continued. What was the difference? Three weeks later (when they hope you’ve forgotten all that) we get the truth:
“We had strong increases in December as builders pulled permits to avoid some onerous regulations being imposed at the first of the year,” Crowe said. “In January, we had an adjustment to that.”
And there it is. Scrambling to secure permits before new regulation counted as economic confidence. High demand for apartment space counts as home construction. And that troubling report published yesterday about a surge in evictions due to foreclosure? All part of the plan.
Welcome to the new normal where apartment leases are as good as home ownership.