The housing divide: Strong government data can't convince the skeptics
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Illustration: Rebecca Zisser/Axios
The housing market might be on shakier footing than official indicators suggest.
Why it matters: Economists are casting fresh doubt on data that showed a rebound in new construction last month. It's at odds with private-sector gauges and corporate anecdotes that point to homebuilders still on the sidelines.
- Whichever side wins out has big implications for the economy — and whether the housing sector will continue to be a drag on growth in the quarters ahead.
Driving the news: The government said Tuesday that homebuilders broke ground on new construction at the fastest pace since February, boosted by apartment projects — flying in the face of homebuilder sentiment that sank to a more than two-year low.
- Taken alone, that offered some hope that the housing market was emerging from its yearslong slump.
- Elsewhere in the report, however, building permits — which foreshadow new construction — fell to the lowest level since 2020, the latest in a string of declines this year.
Zoom in: The government said that housing starts rose roughly 5% from a month earlier, but the margin of error is notoriously large: The actual number might be anywhere between a drop of 9% and a gain of 20%.
- "I know the topic of [government] data is sensitive these days, but if we take the noise out and just look at these start numbers objectively, they don't add up," Jay Parsons, a housing economist, wrote on X.
- Parsons pointed to the opposite sentiment from apartment developers, including executives at AvalonBay who forecast "a low level of supply for the foreseeable future" in an earnings call last month.
Between the lines: Construction has been held down by high interest rates, which are both boosting financing costs for builders and keeping a lid on demand for buyers.
The intrigue: Home prices fell in July by 0.1%, the third consecutive monthly decline, according to Redfin. That might be appealing for those who are looking to buy, but it has helped crush the appetite among builders.
- Home price growth "has halted because the number of homes for sale has rebounded to pre-pandemic levels, while the number of buyers in the market has declined to the lowest level in more than a decade," wrote Redfin.
What they're saying: "I think we're referring to it as a bit of a 'frozen housing market,' with 40-plus-year-low turnover rates, and even new [housing] starts are straddling a bit," Home Depot CEO Ed Decker said on the company's earnings call Tuesday.
- He added that lower interest rates "would certainly help," but it was difficult to pick the level that "unlocks turnover and mobility in U.S. housing and in new construction."
- Home Depot offered fewer promotions last quarter, particularly in its garden department — a result of the company's higher tariff-related costs.
The other side: Lowe's CEO Marvin Ellison told investors Wednesday morning that there was "a healthy pipeline" on home renovation projects and home construction, in part because of pent-up demand from delayed projects.
The bottom line: There are new questions about the health of the housing market and the data that is used to gauge it.
