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Residential Building Permits and Completions Down in September 2011

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.

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