Tuesday, June 17, 2014

Housing permits negative YoY, single family homes still stalled

 - by New Deal democrat

For the first time this year, housing permits turned negative on a YoY basis, down -1.9% from May 2013:

Interestingly, YoY permits for not only single family homes (blue), but also for multi-unit structures (apartments and condominiums) (red) were negative:

As a rolling 3 month average, however, apartment and condominium permits still have trended upward.

On an absolute level, we can see that building permits for single family homes remain dead in the water,with no growth since January of 2013 (blue).  All of the growth has come from apartments and condominiums (red):

[Graph normed to 100 as of January 2013]

Housing starts did remain positive. Single family starts were up +4.7% YoY.  Apartments and condos were up +19.2%.  Total starts were up +9.4%.  Typically permits slightly lead starts, so I expect starts to cool off on a YoY basis in the next month or two.

UPDATED:  Here is the comparison of the YoY% change in permits (blue) and starts (red):

Permits have trended to zero, while starts have had an anomalous surge in the last 2 months. I expect this to be resolved in the direction of permits, which slightly lead, in the next several months.

Here are single family home permits (blue) vs. starts (red), normed to 100 as of January 2013, showing that both have stalled:

Finally, here are multi-unit apartment and condo permits (blue) vs. starts (red), also normed to 100 inJanuary  2013:

This is where the growth has been for the last year plus.  Note again the anomaly of starts growing more than permits.

The bottom line remains:

  • higher interest rates and higher prices have brought the market for new single family homes to a virtual standstill.  It has not shown meaningful growth for nearly the last year and a half.
  • the large "Echo Boom" Millennial generation is piling into apartments and condominiums, partly due to economic distress (inability to afford single family homes).
  • apartment building is also being boosted by historically low vacancy rates and sharp increases in rents, in addition to demographics.