Video Reports

Embed this video

Copy Code

Link to this video

Get LinkEmbedLicenseRecommend (-)Print
Bookmark and Share

By Jeremy Glaser and Robert Johnson, CFA | 11-19-2014 12:00 PM

Don't Count Housing Out in 2015

After a disappointing year, the housing market should pick up some steam in 2015, says Morningstar's Bob Johnson.

Jeremy Glaser: For Morningstar, I'm Jeremy Glaser. We got new housing-starts data this week, and I'm here with Bob Johnson, he's our director of economic analysis, to see what it means for the future of the housing market. Bob, thanks for joining me today.

Bob Johnson: Great to be here today.

Glaser: Let's look at this housing-starts data for October. How many new homes are being built?

Johnson: Well, we are running at just over one million units right now. And the number today was a little bit below what some people were expecting, but it's really not a bad number, and it's not very far off of trend. We've come a long way in the housing market. We were at half a million starts at the bottom of the market. And now, we're running right around one million units. That's still well below the 2.2 that we saw at the peak of the last boom. And even below the 1.5 million units that everybody kind of thinks is the standard ongoing need, based on how many households you form, how many houses get blown over or destroyed every year. That's the number that's really more normal. So, we are still a long ways from that.

Glaser: What's the split between construction in single-family homes and in multifamily? Any big differences in the trend there?

Johnson: I think that's always an interesting thing to look at. And really, if we have a million starts, probably 600,000 of them or so--round numbers--are single-family and 400,000 are apartment homes and multifamily homes. Clearly, we like to see the single-family do better; that's a bigger driver of employment and economic activity than apartments. And, there, we're not really much changed. So, the news there isn't particularly good. It isn't getting worse, but it's not accelerating dramatically either.

Glaser: So, we're seeing some pretty flat data there. When you look at permits, which are even before the starts, do you see any sign that there is some acceleration?

Johnson: Unfortunately not. Those numbers are even flatter. And by the way, I do like looking at the permits data better than the starts data. Everybody focuses on the starts. I like to look at the permits; they are much less volatile. They get revised much less. They tend to be a better predictor of the health of the market. The starts, if it gets too cold and there are two weeks when they can't lay a foundation, then you don't have a start that month. And so while the starts may be in a range of 800,000 to a million over the last year, permits might have been in a narrower band of 900,000 to a million units. So, that's why I really like looking at permits. And, there, the numbers are almost unchanged, year over year. So, there really hasn't been--in the new-home market, in any case--very much of an improvement.

Read Full Transcript
{0}-{1} of {2} Comments
{0}-{1} of {2} Comment
  • This post has been reported.
  • Comment removed for violation of Terms of Use ({0})
    Please create a username to comment on this article