Is the Plunge in Housing Starts a Bad Economic Sign?

If you’re looking for evidence of economic weakness, recent numbers for housing starts are troubling. Residential starts fell 12.3% in June, to the slowest rate since last year’s monster hurricanes, according to the US Census Bureau. But maybe we shouldn’t be too worried.

Why? The homebuilding industry has been askew ever since the Great Recession. The crash wiped out a lot of builders, and they haven’t come back.

Some history: After the financial crisis, home construction began trending upward from the sub-basement, then stalled out this year, and last month marked the biggest decline since November 2016. The actual June results missed projections by the largest amount in more than 11 years, said Paul Hickey, co-founder of Bespoke Investment Group.

As a result, homebuilder stocks are ebbing. Over the past six months, they have slid almost 11%.

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The state of housing has long been a harbinger of how the economy will fare in the future. That sure was true with the 2008 housing crash.

Nevertheless, there are a number of positive economic signals these days, such as the recent jobs report, to bolster optimism.

Plus, it’s not a lack of consumer confidence or bank accounts that are holding back housing starts. Higher mortgage interest rates and rising home prices are strong influences.

But the bigger problem likely is the relative lack of builders. In 2007, 98,067 homebuilders were working in the US. By 2012, that figure had fallen to 48,261. Hence, the supply of dwellings is lower. In 2017, 1.9 new homes were sold per 1,000 people in the US versus the 2.6 average over the past half-century.

Tags: Economy, home sales, housing starts

In response to the collapse of the St. Joseph Health Services of Rhode Island pension fund, state Treasurer Seth Magaziner is calling for new transparency requirements for pension plans managed by religious organizations.

Magaziner said he will seek legislation in the 2019 state general assembly session that would require pension plans managed by religious organizations in Rhode Island to send regular updates on the financial health of the pensions to their plan participants.

Magaziner made the announcement flanked by retired members of the St. Joseph pension plan, which went into state receivership last year, leaving current and retired workers to face a loss of benefits. Approximately 2,700 current and former workers of St. Joseph’s and Our Lady of Fatima hospitals belonged to the plan.

“What the employees and retirees of these hospitals are going through is unacceptable,” said Magaziner. “All workers and retirees deserve to know the truth about their health of their retirement savings.”

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The federal Employer Retirement Income Security Act (ERISA) requires most private pension plans to send members a letter each year outlining the health of their plan. However, church pension plans are exempt from ERISA, which has drawn criticism over a lack of transparency.

“Church plans should be transparent with their members just like other pension plans,” said Magaziner.

Last month, class-action lawsuits were filed against the Roman Catholic bishop of Providence and hospital operator Prospect CharterCare, accusing them of conspiring to mislead state regulators and commit fraud. The suits said that over the last 10 years Bishop Thomas Tobin and the operators of Our Lady of Fatima Hospital vastly underfunded the hospital’s pension plan, and then conspired to conceal that fact to regulators and participants.

“Many people knew that this pension fund was unsustainable without continued financial support,” said Chris Callaci, legal counsel for United Nurses and Allied Professionals (UNAP), “and they said nothing to the 2,700 members of the plan.”

The Roman Catholic Diocese of Providence, which founded the plan, disputed the charges.

“The Diocese of Providence strongly disagrees with the allegations asserted against it in this very long and complex lawsuit,” it said, according to the Providence Journal. “The Diocese will respond appropriately to these claims and we are confident that our position will prevail.”

Tags: Pension, Rhode Island, Seth Magaziner, St. Joseph Health Services of Rhode Island