Today’s New Residential Construction Report continues to indicate significant weakness in the nations housing markets and for residential construction showing large declines on a year-over-year basis to single family permits, starts, and completions nationally and across every region.Single family housing permits, the reports most leading of indicators, again suggests substantial weakness in future construction activity dropping 27.7% as compared to May 2006.
Keep in mind that these declines are coming on the back of last year’s record declines.
To illustrate the extent to which permits and starts have declined, I have created the following charts (click for larger versions) that show the percentage changes of the current values compared to the peak years of 2004 and 2005.
Notice that on each chart the line is essentially combining the year-over-year changes seen in 2005 and 2006 and shows virtually every measure trending down precipitously.
Although year-over-year declines to permits, for example, have not accelerated measurably from September 2006, the fact that they continue to decline roughly 30% should provide a solid indication that they are by no means stabilizing.
Remember that permits, starts, and competitions are not simply independent measures but are, in fact, three logically related and dependent measures.In the process of a building project, first you get the “permit”, next you “start” building, and finally you “complete” the project.
For this reason, one must adjust expectations prior to reading a newly released Census Department report to account for the true nature of the data published simultaneously each month.
As in past months, I have “smoothed” out the unadjusted data and aligned the three data series (i.e. moved starts back a month and completions back six months) to make more obvious their trend.
The following is the unadjusted permits, permit-starts and permit-completion data charted since 2000 (click for larger version).
The following is the unadjusted permits, permit-starts and permit-completion data smoothed with a 12 month moving average (click for larger version).
The following is the smoothed data aligned to indicate the dependent nature of each series and showing the obvious leading nature of permits (click for larger version).
The following is the aligned data normalized to make the relationship even more obvious (click for larger version).
Here are the statistics outlined in today’s report:Housing Permits
Nationally
- Single family housing permits down 1.8% from April, down 27.7% as compared to May 2006
- For the Northeast, single family housing down 7.6% from April, down 15.0% as compared to May 2006.
- For the West, single family housing permits down 2.6% from April, down 28.8% as compared to May 2006.
- For the Midwest, single family housing permits up 5.4% from April, down 21.8% as compared to May 2006.
- For the South, single family housing permits down 2.6% from April, down 30.5% compared to May 2006.
Nationally
- Single family housing starts down 3.4% from April, down 26.0% as compared to May 2006.
- For the Northeast, single family housing starts up 0.9% from April, down 20.6% as compared to May 2006.
- For the West, single family housing starts down 12.1% from April, down 33.3% as compared to May 2006.
- For the Midwest, single family housing starts up 9.1% from April, down 23.2% as compared to May 2006.
- For the South, single family housing starts down 3.4% from April, down 24.2% as compared to May 2006.
Nationally
- Single family housing completions up 1.5% from April, down 19.3% as compared to May 2006.
- For the Northeast, single family housing completions up 24.7% from April, down 21.7% as compared to May 2006.
- For the West, single family housing completions up 1.0% from April, down 27.8% as compared to May 2006.
- For the Midwest, single family housing completions down 7.2% from April, down 31.9% as compared to May 2006.
- For the South, single family housing completions up 1.6% from April, down 9.5% as compared to May 2006.
