FREE NEWSLETTER: Econintersect sends a nightly newsletter highlighting news events of the day, and providing a summary of new articles posted on the website. Econintersect will not sell or pass your email address to others per our privacy policy. You can cancel this subscription at any time by selecting the unsubscribing link in the footer of each email.

posted on 16 April 2015

Residential Building Sector Soft in March 2015. This Sector Remains Weak.

Written by Steven Hansen

Residential building data remains soft. The rolling averages are the best metric to view this series - and the rolling averages are decelerating. This data was below expectations.

  • The unadjusted rate of annual growth for building permits in the last 12 months has been around 10% - it is 7.6% this month.
  • Unadjusted 3 month rolling averages for permits (comparing the current averages to the averages one year ago) show that construction completions are lower than permits this month for a change.

3 month Rolling Average for Year-over-Year Growth Unadjusted Data

Building Permits Construction Completions
Current Movement decelerating decelerating

Unadjusted 3 Month Rolling Average of Year-over-Year Growth - Building Permit (blue line) and Construction Completions (red line)

Econintersect Analysis:

  • Building permits growth decelerated 2.2% month-over-month, and is up 7.6% year-over-year.
  • Single family building permits declined 3.1% year-over-year.
  • Construction completions decelerated 5.3% month-over-month, down 6.8% year-over-year.

US Census Headlines:

  • building permits down 5.7% month-over-month, up 2.9% year-over-year
  • construction completions down 3.9% month-over-month, down 5.8% year-over-year.
  • the market expected:
Annual Rates Consensus Range Consensus Actual
Housing Starts 0.950 M to 1.120 M 1.048 M 0.926M
Housing Permits 1.040 M to 1.150 M 1.085 M 1.039 M

Note that Econintersect analysis herein is based on UNADJUSTED data - not the headline seasonally adjusted data.

When more building permits are issued than residences completed - the industry is expanding - and this expansion was underway for three years (except for last month). In the graph below, any value above zero shows more permits are being issued than completions.

Difference Between New Home Building Permits and Construction Completions (unadjusted)

Construction completions trend is now noticeably downward.

Unadjusted Year-over-Year Change New Homes -Permits (blue line) and Construction Completions (red line)

Other points to take away from the data:

  • Before we start thinking all is well, the residential home industry is about half of the pre-2005 peak.

Seasonally Adjusted Residential Building Permits

  • Apartment permits (structures with 5 or more units) grew 5.0% year-over-year. Apartments accounted for 34.9% of all building permits, and 25.4% of construction completions.

Unadjusted Ratio Apartment Permits (structures with 5 or more units) to Total Permits - higher number means more Apartments

Caveats on the use of Building Permits Data

This is a non-monetary index. Recently, the data has had moderate downward revisions one month after initial release. Therefore, the release data this month should not be taken too seriously until next month.

This sector expands when more housing permits are issued than houses completed. The data is not necessarily accurate in real time, however. For 2011, there were more building permits than construction completions (total over a complete year) for the first year since 2005.

  • 2005 = 225K more permits than construction completions
  • 2006 = 140K more construction completions than permits
  • 2007 = 104K more construction completions than permits
  • 2008 = 214K more construction completions than permits
  • 2009 = 211K more construction completions than permits
  • 2010 = 47K more construction completions than permits
  • 2011 = 39K more permits than construction completions
  • 2012 = 181K more permits than construction completions
  • 2013 = 203K more permits than construction completions
  • 2014 = 149K more permits than construction completions

This data in this series is created by survey - not by hard data:

  • Permits - A monthly survey of 9,000 selected permit-issuing places; and an annual census of an additional 11,000 permit places that are not in the monthly sample. The monthly sample of permit-issuing places was selected using a stratified systematic procedure. All permit places located in selected large metropolitan areas were selected with certainty. The remaining places were stratified by state. Places that exceed a cutoff value, which varies by state, were selected with certainty. Remaining places were sampled at a rate of 1 in 10.
  • Construction Completions - To provide nationwide coverage of building activity, a multi-stage stratified random sample procedure was used to select approximately 900 building permit-issuing offices, and a sample of more than 70 land areas not covered by building permits. Each month, for permit-issuing places, a sample of residential building permits is selected from each of the sampled permit offices. The probability of selecting a permit is proportional to the number of units authorized by the permit. Permits for one-to-four-unit buildings are sampled at an overall rate of 1 in 50. All permits authorizing buildings with 5 or more housing units in the sampled permit offices are selected. Each month, for areas that do not require building permits, field representatives conduct a road canvass in each of the sampled non-permit land areas to identify the start of new buildings. All new residential buildings found are selected for the survey. Once a permit or building is selected, a field representative contacts the owner or builder, by telephone or in person, to conduct the interview each month as necessary. Contact continues until the project is either completed or abandoned. If a single-family home is not sold by the time of completion, the project will continue to be followed until the sale occurs. Each month, interviews are required for about half of the buildings currently being followed up. Each month, housing starts, completions, and sales estimates derived from this survey are adjusted by the total numbers of authorized housing units (obtained from the Building Permits Survey) to develop national and regional estimates. Estimates are adjusted to reflect variations by region and type of construction, and to account for late reports and houses started or sold before a permit has been issued. Reported data are seasonally adjusted. Monthly estimates are made for all permit-issuing places nationwide. If a survey report is not received, missing data on permits for new construction are imputed except for places that are also selected for the Survey of Construction (SOC). For these places, SOC permit data are used. We request assistance from State Data Centers to encourage jurisdictions to respond.

The US Census uses a multi-year methodology to seasonally adjust their data. Econintersectuses a simpler year-over-year analysis to seasonally adjust the data - the fear being that a major depression, government interference (incentives) in the housing markets, and other new normal effects are distorting the historical multi-year reference data.

Econintersect determines the month-over-month change by subtracting the current month's year-over-year change from the previous month's year-over-year change. This is the best of the bad options available to determine month-over-month trends - as the preferred methodology would be to use multi-year data (but the New Normal effects and the Great Recession distort historical data).

To say this sector is in a depression is an understatement. Please refer to the PERMIT FRED graph above.

Old Analysis Blog

New Analysis Blog

All Posts on Real Estate, Housing and Prices All Posts on Real Estate, Housing and Prices
All Posts on Construction All Posts on Construction

>>>>> Scroll down to view and make comments <<<<<<

Permanent link to most recent post on this topic

Click here for Historical Releases Listing

Make a Comment

Econintersect wants your comments, data and opinion on the articles posted.  As the internet is a "war zone" of trolls, hackers and spammers - Econintersect must balance its defences against ease of commenting.  We have joined with Livefyre to manage our comment streams.

To comment, using Livefyre just click the "Sign In" button at the top-left corner of the comment box below. You can create a commenting account using your favorite social network such as Twitter, Facebook, Google+, LinkedIn or Open ID - or open a Livefyre account using your email address.

You can also comment using Facebook directly using he comment block below.

Econintersect Economic Releases


Print this page or create a PDF file of this page
Print Friendly and PDF

The growing use of ad blocking software is creating a shortfall in covering our fixed expenses. Please consider a donation to Econintersect to allow continuing output of quality and balanced financial and economic news and analysis.

Take a look at what is going on inside of
Main Home
Analysis Blog
Taking a Wrench to Healthcare
Rising Tide Does Not Lift All Ships
News Blog
Consequences Of Rising Income Inequality
America's Most Competitive Renters: Why Many Are Choosing To Rent
Historical Echoes: The Bank Teller Action Figure, Or It's All In The Packaging
Infographic Of The Day: The Oil Market Is Bigger Than All Metal Markets Combined
U.S. 2016 Election Divides Advanced And Emerging Economies
Which Countries Read The Most
The World's Most Expensive Retail Locations
How To Help Energy Demand Match Renewable Supply
Music Subscriptions Revive Revenue
How The Space Station Avoids Junk In Space
Infographic Of The Day: The Most Popular Jobs In A Decade
Early And Late Cycle Verdicts Are Baseless
The Surprising Divergence Of Employment And Capacity Utilization
Investing Blog
FinTech Is Taking A Bite Out Of Banks
Options Early Assignment - Should You Worry?
Opinion Blog
The Beer Goggles Stock Market
US 2016 Election: Will US-China Relations Change
Precious Metals Blog
Preparing For Post-Election Social Unrest
Live Markets
21Oct2016 Market Close: Major US Indexes Close Flat On Low Volume, Crude Prices Resume Climb, US Dollar Stabilizes In Mid 98 Handle, Yes, Most Investors Are Worried Which Way This Market Will Go
Amazon Books & More

.... and keep up with economic news using our dynamic economic newspapers with the largest international coverage on the internet
Asia / Pacific
Middle East / Africa
USA Government

Crowdfunding ....



Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day


Asia / Pacific
Middle East / Africa
USA Government

RSS Feeds / Social Media

Combined Econintersect Feed

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution



  Top Economics Site Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2016 Econintersect LLC - all rights reserved