From a small northwestern observatory…

Housing starts reportedly dipped 9.9% in June, with the bulk of that in multifamily starts. A few quick points about that. First, rebounds from a recession are anything but smooth. Come back in December and we’ll see what the trend line looks like. Second, note what happened to apartments. While apartment vacancies are still very healthy (5% range, nationwide), there are signs we’re getting a bit overbuilt in that sector. There was a huge rush, and I wouldn’t be surprised if many (most?) of the equity investors and lenders are looking for a chance to catch their breath.

Finally, I’ve opined in a number of places about the loss of construction talent and infrastructure. The long, deep recession really cost us in skilled labor (apprentice programs all the way to master crafts people) and in entitled land. A lot of building sites which were carrying entitlements (zoning, permitting, concurrence requirements, etc.) saw these vital legalities pass into the sunset (most of these had “build-by” dates). Even worse, many local planning and permitting offices are short-staffed, as cities and counties had to decide between laying off under-utilized permitting staff or over-utilized cops, firefighters, and EMTs. Guess what decisions councils and mayors made? On top of that, these understaffed departments will be the last to staff back up to normal.

Sigh….. normal housing starts in America post-WWII are about 1 million per year. When the total got down to, say, 800,000, the Fed would goose the monetary base, banks would make loans, and builders would fire up the pick-up trucks. When starts got above 1.5 million, the Fed would dim the lights a bit, and builders would go fishing. Overall, starts came in at 836,000 in June, down from May but amazingly up 10% from last year. Prior to 2008, a sustained level of starts in this range would be emblematic of a recession. Today, it’s good news. Go figure.

Oh, and one other quick thing — one pundit (I want to say on CNBC) recently suggested Ford, Chevy, and Chrysler as plays on housing starts. When starts go up, Ford sells more F-series pickups. Reportedly, Ford profits to the tune of $10,000 for each of these main-stays of the building site, and currently sells 72,000 of them a month. Do the math.