Single Family Housing Not Available
In previous articles, I have been discussing the lack of construction of single family homes which is causing prices to increase. The chart below shows the inventory of single family homes for sale on a seasonally adjusted basis. As you can see, inventory levels are the lowest since 1994. This is a sharp reversal from the early 2000s where inventory skyrocketed. That was an early warning sign that the housing market was in trouble. Part of the reason why houses aren’t being built is zoning laws. That being said, you’d expect the price responses to cause more building. The weak housing starts cause a drag on GDP growth. The high housing prices cause discretionary income for consumers to drop. Supply issues sound like a good problem to have, but it’d be better if more single family homes were built.
The chart below shows this dynamic in action as the private residential construction spending index for single family homes hasn’t rebounded close to the levels seen during the housing bubble. The spending on home improvements has rebounded nicely. Because Amazon – AMZN hasn’t been able to dominate the industry yet, home improvement retailers have been doing well. Multifamily housing construction spending has rebounded past the previous cycle high, making up for the weakness in single family spending.
Chinese Government Focused On Politics
As I have discussed previously, the Chinese government is undergoing changes this week as the 19th National Congress of the Communist Party takes power. The chart below shows the mentions on party Congress reports for the terms politics and the party as well as economy, market, and reform. As you can see, politics and the party saw an increase in usage while economy, market, and reform saw less mentions. This could be bad news for China in the long run as it might mean the country’s leadership has moved its attention away from allowing more competition to enter the country. Historically, when China allows market forces to enter it, the economy accelerates. The other possibility for this chart is economics weren’t discussed as much because the Chinese economy has stabilized this year.
