Wednesday, February 19, 2014

Housing permits decline, housing starts now down YoY

 - by New Deal democrat

As Bill McBride reminded his readers this morning, he and I have a charitable bet on the direction of the housing market this year.  In the past, with rare exception, whenever interest rates have risen by at least 1%,  housing permits have decreased by 100,000 a year or more.  The exceptions (such as 1968 and at the peak of the housing bubble) were when "buy now or be forever priced out" was a reasonable - or widespread - argument.  In 1968 it was because of secularly and rapidly rising interest rates; in 2004-05 it was because of seemingly permanently rising prices.

This morning January housing permits and starts were reported.  Permits fell to 54,000 to 937,000.  This contrasts with 991,000 in December, and 915,000 one year ago, so permits rose 2.4% on a YoY basis.

The big story, however, is that housing starts fell 168,000 to 880,000.  Last month's number was revised upward by 49,000 to 1,048,000.  Which means that starts are down from 898,000 one year ago, or -18,000, or -2.0% YoY.

It seems obvious that weather was an issue in the January reports.  And the initial anecdotal reports from February (e.g., this morning's MBA report) look even worse.

But what is happening is what I expected to happen.  The weather has just made it happen a little sooner, I think.

PS.:  I'll update with YoY graphs once they are available on FRED.