Tuesday, June 19, 2012

Permits Show Building Recovery is Real

  - by New Deal democrat

If I could only have access to one economic statistic, it would be housing permits.  They are a reliable long leading indicator for the real economy.  So this morning's report that 780,000 permits were issued on an annualized basis in May is an unadulterated positive.

Not only is this the highest number in over 3 1/2 years, it validates March's 769,000 number, confirming the trend.  And this one can't be fobbed off as due to a warm winter.

I notice that Barry Ritholtz and Tim Iacono are pooh-poohing this.  I disagree.  The important number is how much of an increase or decrease we are seeing in construction, not the overall amount.  I'll take a 200,000 increase off a miserable bottom over a 50,000 increase in a boom anyday.  Four times as much new activity is being added to the economy in the former case vs. the latter.

In any event, especially since most of the recent news has been gloomy, and especially in view of my last post, I figure I owe you this bright sun shining through a parting of the clouds.

From Bonddad: several weeks ago, I posted an article titled,"Will Housing Save Us?" where I came to this conclusion:

To sum up, we over-invested in housing in the 2000-2010 time period.  Now the pendulum has swung the other way to a period of under-investment, largely to work off the massive inventory overhang.  But, we're getting close to the end of the cycle, which means a bump in demand could lead to the market being caught off-guard.  In addition, there is the interest rate story; the cost of borrowing to buy a home isn't going to get much cheaper.

The main element missing here is the stimulus that gets things moving; and the answer to that is jobs.

As I mentioned in the above-linked article, the overall supply of new homes has swung far to the too little side; we need to increase inventory to simply restock.

Also, consider this post from Carpe Diem, titled "Real Estate Market is Hot."

Early reports are just starting to come in for May real estate sales, and it's already starting to look like a blockbuster sales month.

Double-digit sales gains have been reported so far in:

1) Seattle by 23% vs. last year ("The most dramatic we’ve seen in at least five years. While home sales have been on the rise for months, the previous gains in homes prices had been minor. May’s real estate statistics have solidified the trend and pushed it into overdrive."),

2) Pittsburgh by 20%,

3) Albuquerque by 29%,

4) the Denver-area by 24%,

5) the Memphis area by 25%,

6) Chicago by 19.2%,

7) Nashville by 28.5%,

8) Boston by 28%,

9) Charlotte by 18.2,

10) Iowa by 14%,

11) Birmingham by 21%,

12) Milwaukee by 30%, 

13) Charleston by 24%,

14) Baltimore by 13%,

15) Minneapolis by 20.5%,

16) Des Moines by 18%,

17) Champaign County (IL) by 26%.

And land sales in the Las Vegas Valley hit a two-year high in the first quarter with $40.3 million in total sales volume, a 38 percent increase from $29.1 million in the year-ago quarter.

It's starting to look like there might actually be a housing recovery underway; we're certainly past the bottom of the market.