New Home Construction Indicates Sector Expansion In May 2011

The recession ended on paper in June 2009.  I could argue that for consumers it is ongoing, but the downward spiral in new home construction has ended for now.  For the last three months, there have been more permits issued for building new homes than new home construction completions (through May 2011).

Does this mean we should break out champagne?   The home construction industry is so deep in the whole it may take longer than a decade to recover.  Looking at construction completions and comparing year-over-year data there is no evidence of bottoming:

Home construction has been in a downward spiral since late 2006, and even the May data shows it is still falling YoY.  But the good news is that permits are now higher than completions – you gotta have a permit to build a house and the implication is that more house will be built going forward than have been in the recent past.

For the last three years, residential permits issued have been more-or-less similar YoY.  This month, however – the “big” uptick can be laid squarely on multi-family (apartment) units – the growth YoY was 6,500 units.  The growth of all residential units as shown on the above chart was 5,400 units.  Apartments appear to be driving the turnaround in residential constuction.

Econintersect predicts before this year is over, new home construction completions will no longer be falling YoY.

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