Building Permits Contract in July 2011

Headlines for new residence construction data in July 2011 say permits contracted by 3.2% month-over-month, while completions grew 11.8%. Econintersect’s analysis says permits fell 5.25% month-over-month, while completions grew well over 20%.

The takeaway from the above graphic is that, while residential permits fell 5.25% month-over-month, the year-over-year increase was 0.1%.  No matter what the yearly or monthly increases are, however, the new home industry in general is only 30% of the peak.

One more qualifier on the residential permits number – the increase is only multi-residence (apartments), which continues to be the green shoot of permits. If you are focused on single family homes only – permits fell 4.2% year-over-year.

The US Census uses a complicated formula to seasonally adjust their data.  Econintersect uses a simple year-over-year analysis of the US Census unadjusted data.

What is important is that this was the 16th straight month of year-over-year growth for multi-residence building permits.

The headline should continue to be that the U.S. new residence industry has had more permits issued than construction completions for the last 5 months. The residential construction industry itself has bottomed and is no longer contracting, but is only 30% of its former self.

Until July 2011, for 56 of the last 57 months, construction completions have declined year-over-year.  This month, completion GREW 10.3% but still permits issued were slightly more than completions.  With 5 months straight of more permits being issued than construction completions, it appears the worst is over for residential builders.

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