Strategy in TECH...
Residential construction of new homes – known as housing starts – continues to register monthly declines as a combination of still-high home prices along with rapidly rising mortgage rates results in collapsing home affordability. While economists continue to debate if and when the U.S. economy enters a recession – it’s clear that housing overall, and the home building segment specifically – is already there.
A new analysis that correlates consumer confidence by income level has produced a shocking red flag for any business that offers goods and services to the luxury customer – as do many custom integrators. Fire up your sensors and watch closely to see if clients in your market are subject to this alarming trend.
On Tuesday, the U.S. Department of Commerce released their latest report on residential construction for the month of September 2020. Like last month, the results on housing starts were mixed, with both good news for custom integrators and bad news for the overall industry – suggesting again that housing growth, while robust, is beginning to moderate.
In new economic data released by the government today, the real gross domestic product (GDP) for the second quarter of 2020 declined an astonishing 32.9%, the worst ever such reading in recorded history. This result follows a decline of 5% in the first quarter and demarks a deep and painful recession resulting from the impact of the COVID-19 pandemic engulfing the United States, and the world.
The Census Bureau, in cooperation with the U.S. Department of Housing and Urban Development, released new home construction data for November, offering details on what is generally known as housing starts. The overall construction starts – which includes both single-family and multi-family homes – both showed increases over the revised numbers for October, suggesting a return to economic stability after a period of concern about a possible slowdown.
With most economists on pins and needles over the recent number of economic data points that seem to suggest an impending economic slowdown, word came at the end of the last week that the latest jobs report from U.S. Bureau of Labor Statistics saw employment take a big jump. According to this latest data, employers added a significant 224,000 jobs in June, a big increase from May’s anemic results.
The latest data from the US Census Bureau shows a pretty nice increase in April residential housing construction starts – a key economic data for the custom integration industry. According to the report, overall housing starts came in at 1,235,000 units on a seasonally adjusted annual rate. This is 5.7% above the revised March rate of 1,168,000…and yet is it also down.
In a result that was not expected by most industry analysts, contract signings to purchase previously owned homes dropped in December for the third month in a row. The news is widely viewed as yet another indicator of a housing industry slowdown, along with declining affordability and rising housing and mortgage costs.
Recently, I warned of some troubling housing related news. You may recall that a collapse in the housing sector was a key driver of the last recession in 2007-2009 that was so painful for the custom integration community, and for the country as a whole. In my report – Are You Prepared for the Coming Recession? – I noted a pronounced and troubling turn in several housing industry specific data, perhaps presaging another economic downturn. Now new government data shows that, once again, new residential sales have declined in the month of September.
Five Steps to Take Now to Protect Your BusinessOccasionally, I’ll chat with an integrator or other industry colleague about that ugly shared nightmare experience, otherwise known as the recession of 2007-2009. This recession, unlike others in the past, zeroed in like a torpedo on the residential construction market and dramatically reshaped the custom integration industry. For those of you joining the industry since that time, you dodged the bullet…but you also missed the lessons that survivors were forced to learn in order to keep afloat.
