SBE - Small Business & Entrepreneurship Council

10/20/2020 | Press release | Distributed by Public on 10/20/2020 17:11

The Latest Economic Data: Housing’s Boost to the Economy

By SBE Council at 20 October, 2020, 4:17 pm

by Raymond J. Keating-

In this time of uncertainty, the housing business stands out as a major positive.

For example, on Monday, October 19, it was reported that the National Association of Home Builders/Wells Fargo Housing Market Index hit an all-time high of 85 in October. After September's 83 index measure, these are the first two times the index was above 80.

As for the breakdown, it was reported: 'The HMI index gauging current sales conditions rose two points to 90, the component measuring sales expectations in the next six months increased three points to 88 and the measure charting traffic of prospective buyers held steady at 74.'

These positives lined up with the Census Bureau's new residential construction for September released on Tuesday, October 20. The Census estimated that housing starts in September (seasonally-adjusted annual rate) were up by 1.9 percent compared to August, and by 11.1 percent compared to a year earlier. However, the big story in terms of starts came with single-family housing, where starts grew by 7.8 percent compared to August, and by 22.3 percent versus September 2019.

Source: Federal Reserve Bank of St. Louis, FRED

As for building permits - which serve as indicators for future construction - they increased in September by 5.2 percent compared to August, and by 8.1 percent versus September of last year. Again, single-family units show particular robustness, with permits in September up by 7.8 percent versus August, and 24.3 percent versus September 2019.

It's hard to think of another industry that has snapped back and grown during this pandemic economy to the degree housing has. And as SBE Council has noted before, housing is dominated by small businesses, with, for example, 99.7 percent of employer firms in the residential construction sector having fewer than 100 employees. For good measure, since residential investment is a not-insignificant portion of GDP, housing is a clear plus for our overall economic recovery.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.