Headlines for new residence construction data in September 2011 say permits declined 5.0% month-over-month, while completions increased 2.1%. Econintersect’s analysis shows a clear contraction both in permits (down 3.7%) and construction completions (down 5.0%) month-over-month, however the year-over-year number are higher.
The bad news is that building permits, after going six straight of exceeding construction completions, in September were lower by 5.7%. If more building permits are issued than construction completions, months down the road completions grow.
Even though the month-over-month data is down, the year-over-year growth shows an expansion in residential real estate which translates to a GDP tailwind. The chart below illustrates the positive “less good” growth.
Other points to take away from the data:
- Before we start thinking all is well, the residential home industry has shrunk by two-thirds since the home crisis hit in 2005.
- Apartment permits grew 39% year-over-year and 16% month-over-month. In September, Apartments accounted for 28.9% of all building permits.
The US Census uses a multi-year methodology to seasonally adjust their data. Econintersect uses 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 data.
I am afraid the weak economic conditions are effecting residential building – just when the industry was gaining some traction.