March 29, 2017

Residential Construction Declines in October

Following 2 consecutive months of growth in the construction of new homes, there was an 11.7% decline in the construction of new homes during October, according to statistics released today [.pdf] from the Housing Department and the Census Bureau. The rate of new home construction in October is the lowest in 18 months and the third lowest since January 1959. These facts are indicative of a still fragile housing market. Almost a month ago, Left and Right News correctly predicted this October decline, albeit the decline was higher than projected. This prediction was based on a simple relationship: the amount of building permits issued in a month generally indicates the amount of new homes being built the next month. Therefore, a decline in the amount of building permits issued during September corresponded to a decline in the construction of new homes during October. With this being said, what’s in store for new home construction in November?

There was a 0.5% increase in the amount of building permits issued during October. With such a slight change, a general trend is not clear for November. However, keep in mind that month-to-month percent changes are measured against the previous month. Accordingly, the 0.5% increase of issued permits in October is measured against the amount of issued permits in September. Therefore, the levels of permits issued during September and October are nearly equal. As a result, Left and Right projects November will see a second consecutive month of decreased new home construction. Though, the November decline will be more modest than the October decline.

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