America, renters nation

housing permits, single family compared to multiple units, 2002 to 2012, quarterly with YOY % change

This week we saw some conflicting views on the state of the US housing market: JP Morgan CEO Jamie Dimon claimed that “housing has turned the corner”, an assertion denied by Citigroup and other analysts. Sure, I know that record low mortgage rates and, of course, The Fed’s meddling have trigged a wave of refinancing activity but is that indicative of “housing turning a corner”?

I’m not convinced so I started looking at the data (as I tend to do in these situations) and, as usual, I ran across an interesting dataset. The chart above shows housing starts for single family dwellings (PERMIT, black line) compared to housing starts for dwellings containing five or more rented units – apartments, in other words (PERMIT5, blue line). The chart shows year on year percentage changes and clearly construction of rentable units has been surging while single family dwellings – while increasing at a good clip – lags. What’s going on? Well, lending criteria have tightened, significantly. Gone are the days of the liar and ninja loans and now we’re back to the basics of lending: character, collateral and capacity. It seems Americans are short of all three, so we’re slowing transitioning from a nation of homeowners to a nation of renters.

Comments are closed.