“Bottoming” New Housing Data Is A Reflection of the Economy

The New Normal USA economy growth is mostly improvement in productivity mixed with a whole bunch of inflation.  This does not create much jobs growth.  The old normal economy is reflected by construction.

And the engine of this old normal growth was residential construction.  The good news is that it is bottoming.  The bad news is that residential construction is dead as shown in the April 2011 data released today.

Privately-owned housing units authorized by building permits in April were at a seasonally adjusted annual rate of 551,000.
This is 4.0 percent (±1.1%) below the revised March rate of 574,000 and is 12.8 percent (±1.2%) below the revised April 2010 estimate of 632,000.  Single-family authorizations in April were at a rate of 385,000; this is 1.8 percent (±1.0%) below the revised March figure of 392,000.  Authorizations of units in buildings with five units or more were at a rate of 143,000 in April.

Privately-owned housing completions in April were at a seasonally adjusted annual rate of 554,000. This is 4.1 percent (±15.2%)* above the revised March estimate of 532,000, but is 25.5 percent (±8.6%) below the revised April 2010 rate of 744,000.  Single-family housing completions in April were at a rate of 420,000; this is 14.4 percent (±12.8%) above the revised March figure of 367,000. The April rate for units in buildings with five units or more was 118,000.

The amount of residential building permits is still dropping YoY.  This drop is caused by the gains over the last few years artificially created by the first time home buyers stimulus.  But before this year finishes, it will start to be compared with non-stimulus data.

Few are noticing the market is bottoming at around 50,000 units per month.  This is the amount of permits being issued and the amount of construction completions.

In the above graph, data is not compared month-over-month (MoM) or year-over-year (YoY) – but a simple comparison between permits and completions in the same month.

The residential new home sector is far from healthy – but its condition is now stable.   Headwinds to the economy being caused by this sector will soon abate.

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