In construction - more apartments now, more single homes coming.

Wanted to go over a few observations on the housing market, in light of last week's release on residential construction from the Census Bureau.

One item that’s an important difference over the last year is that more single-family homes have had permits taken out for them in the last 12 months, but multi-unit housing units have declined by a larger amount, meaning total housing permits are down.

But the homes under construction and being completed have become more likely to be multi-units over single-family.

And even as home starts have risen and fallen since 2020, the rate of completions haven’t changed all that much. That indicates to me that construction work fell behind demand in 2021 and 2022, and now has caught up. So even though there may be concerns over a lack of housing starts, I’m not sure that’s translating into a lack of home construction activity, which likely means that there will be little to no impact when it comes to jobs and business activity in that sector.

Where there is a clear decline is in the amount of homes being sold in America.

U.S. existing home sales dropped to a 13-year low in September as surging mortgage rates and tight supply combined to reduce affordability for many first-time buyers.

Existing home sales fell 2.0% last month to a seasonally adjusted annual rate of 3.96 million units, the lowest level since October 2010, the National Association of Realtors said on Thursday. They are counted at the closing of a contract and last month's sales likely reflected contracts signed in August, when the rate on the popular 30-year fixed mortgage vaulted above 7%.

Economists polled by Reuters had forecast home sales slipping to a rate of 3.89 million units. Sales dropped 1.1% in the South and decreased 4.1% in the Midwest. They rose 4.2% in the Northeast and slumped 5.3% in the West.

Home resales, which account for a big chunk of U.S. housing sales, declined 15.4% on a year-on-year basis in September.

And this makes sense. If you have a home, you might have a fixed-rate mortgage that is well below anything you might get with a new loan today, so there’s an added cost to changing homes. Likewise, if you don’t own a home and want to, the costs to buy a home have gone up, not only because of higher asking prices, but because of higher mortgage rates.

So we have very disparate impacts on our housing market, and on Americans in general. If you’re facing higher rents and have higher interest rates get in the way of your plans of buying a house, these are tough and frustrating times. If you’re a realtor and rely on more home sale activity for more income, this is not good.

On the flip side, if you own your home and are locked into a low-rate mortgage, you are somewhat immunized from the higher shelter costs we see in the monthly CPI reports. That means you are likely not being hurt as much by inflation, and it means your wealth continues to increase in most parts of the country as your home appreciates in value.

It's that appreciation in wealth that led to a somewhat surprising finding by the Federal Reserve in recent days.

Net worth surged 37% in pandemic era for the typical family, Fed finds — the most on record https://t.co/H2xWE5RVcl

— CNBC (@CNBC) October 19, 2023

Net worth surged for the typical family during the pandemic era, largely on the back on higher home and stock prices and government stimulus measures, the Federal Reserve reported Wednesday in its triennial Survey of Consumer Finances.

Net worth is a measure of household assets after accounting for liabilities. After accounting for inflation, median net worth jumped to $192,900, a 37% increase from 2019-22, the Fed found.

That percentage growth was the largest since the Fed started its modern survey in 1989. It was also more than double the next-largest increase on record: Between 2004 and 2007, right before the Great Recession, real median net worth rose 18%....

But this is also something where some groups benefitted much more than others from this pandemic-era wealth growth.

Of course, not everyone benefited equally: Assets like homes and stocks are generally not held by families in the bottom 20% by income, for example, the Fed said.

And wealth gaps are still big: Families in the bottom 25% by wealth had a median net worth of $3,500 in 2022. The top 10% had $3.8 million.

So this is why we need to throw out some of our priors when it comes to looking at what data tells us might happen with both the home market and the economy in the coming months. We have a widely varied situation where many are better off than they were 4 years ago, and jobs are continuing to grow. But others haven't seen the same benefits, and are now growing their credit card balances to record levels, with higher interest rates compounding that debt.

And our policymakers and central bankers need to realize that with inflation is ebbing but debt rising, and we should get our monetary and fiscal policies back into balance. And it needs to be soon, before those who haven't seen much of a boost in recent years start to feel significant economic pain, and drag our currently growing economy down with it.