March 26, 2017

Construction Facts for December 2010

During December, residential construction declined 4.3%, according to housing statistics released today [.pdf] from the Census Bureau and Housing Department. There were nearly 41,000 residential housing starts in December, which is 8.2% below December 2009, when there were 48,000 housing starts. Despite these dim numbers for December, the set of statistics released today also showed a sign of light. The number of building permits issued during December increased 16.7%. This sets a new record for the greatest monthly rise in building permits.

The number of building permits issued during a month generally indicates housing starts for the next month. As a result, January construction statistics will likely show a surge in housing starts.

The previous record for new building permits occurred in June 2008, when there was a rise of 14.1% (this CNN article incorrectly states June 2008 had a greater rise than December). Even though December brought a record rise in building permits, a prime reason why the December permit statistic is so great is due to the meager level that building permits have sank to.

For instance, there were about 53,000 building permits issued in December, which is up from 45,000 building permits issued in November, but there were 172,000 building permits issued in December 2005. This statistical relationship shows how recent numbers have been quite low. Therefore, the low nature of recent permit statistics allow for a greater percentage change even when the change is not all that great. This means we should not interpret the December rise in permits as any sort of key turnaround for the housing sector, but it is at least an improvement.

Additionally, a survey released yesterday from the National Home Builders Association also showed weak numbers for the housing market. The NHBA has been conducting a monthly survey for the past twenty years of home builders that determines whether builders view the housing market as good or poor for the next six months. A rate above fifty signals good conditions, while anything below fifty signals poor conditions. The survey released yesterday showed an extremely poor rate of sixteen, which is also the third consecutive month with this rate. Clearly, builders have a lack of confidence in the housing market. This lack of confidence is highly associated with the high unemployment rate, which is the main factor for the number of prospective home buyers.

Lastly, a resurgence in the housing market would require more than a slight increase in building permits. Most importantly, the unemployment rate must drastically improve or else there will not be a noticeable change in the number of prospective home buyers.

Comments

  1. In regard to the incorrect statistic from the linked CNN article, take a look at this link: http://www.census.gov/const/newresconst_200807.pdf which shows a revised June permit rate of 94,833 issued permits. Then look at this link: http://www.census.gov/const/newresconst_200806.pdf which shows a revised May permit rate of 81,500 issued permits. This results with a 14.06% increase for June 2008. As the above article mentioned, June 2008 was the previous record holder for percentage increases in issued permits, but the linked CNN article says June 2008 is still the record holder – an inaccurate “fact” from CNN.

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