Much is being made by the talking heads of the poor housing data for February 2011. The headlines of over 20% fall YoY of housing permits would scare the pants off of the already terrible new home construction industry followers.
Headlines from the U.S. Census Bureau report:
BUILDING PERMITS – Privately-owned housing units authorized by building permits in February were at a seasonally adjusted annual rate of 517,000. This is 8.2 percent (±3.3%) below the revised January rate of 563,000 and is 20.5 percent (±3.5%) below the February 2010 estimate of 650,000. Single-family authorizations in February were at a rate of 382,000; this is 9.3 percent (±1.2%) below the revised January figure of 421,000. Authorizations of units in buildings with five units or more were at a rate of 121,000 in February.
HOUSING STARTS – Privately-owned housing starts in February were at a seasonally adjusted annual rate of 479,000. This is 22.5 percent (±9.8%) below the revised January estimate of 618,000 and is 20.8 percent (±9.0%) below the February 2010 rate of 605,000. Single-family housing starts in February were at a rate of 375,000; this is 11.8 percent (±10.0%) below the revised January figure of 425,000. The February rate for units in buildings with five units or more was 96,000.
HOUSING COMPLETIONS – Privately-owned housing completions in February were at a seasonally adjusted annual rate of 581,000. This is 13.9 percent (±16.8%)* above the revised January estimate of 510,000, but is 13.0 percent (±14.9%)* below the February 2010 rate of 668,000. Single-family housing completions in February were at a rate of 468,000; this is 11.2 percent (±15.6%)* above the revised January rate of 421,000. The February rate for units in buildings with five units or more was 107,000.
The unadjusted data used by Econintersect tells a slightly better story.
Housing permits were down 18% YoY – but actually higher than January 2011 by 100 units. Historically January and February permits are similar. Last year, the data did not match the historical profile creating the relatively large YoY decline. Overall, Econintersect believes this data is low – only because it is lower than the housing completions (36,000 permits vs 39,700 completions).
The bottom line – until permits exceed completions, this sector has not bottomed.
The sometimes green shoot – apartments – is up 9% versus the 17% YoY last month. Note that 9% is only 700 housing units nation wide. Econintersect believes the trend showed a gentle improvement in 2010, but 2011 will be judged against 2010 data. It does appear this green shoot is beginning to look less good.
It is likely 2011 will see the bottom of the new home construction death spiral based on the softening negative trend lines. Please refer to Econintersect’s analysis on this subject (analysis here). The definition of a housing bottom in 2011 will depend upon the course of the economy overall.
At this point, it is clear that Japan’s current situation will begin to drag on the world economy – and therefore employment, through the next six months. Uncertainty is the enemy of economic expansion. Rising employment would put a positive dynamic into play into housing. Temporary, all bets are off until the world has more understanding of the current situation.
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