Carpe Diem

Building permits and housing starts in October were highest since 2007, with huge gains of 30% and 42% vs. last year

The Census Bureau released its monthly report today on new residential construction, here are some highlights for the month of October:

1. There were 866,000 building permits issued in October (seasonally adjusted annual rate), which was 29.8% above last year, and the 18th straight month of an annual increase (the last 13 months have been double-digit increases).  Except for a slightly higher number of permits in September (890,000), October had the highest number of monthly permits since July 2008. For the month of October, it was the highest number of building permits issued since 2007.

2. Housing starts rose in October to 894,000, which was the highest number of starts since July 2008, and a 41.9% increase over last year.  Over the last 20 years, there have only been three other months with annual increases in housing starts above 40%: April 2010, March 1994 and January 1992.  For the month of October, housing starts this year were the highest since 2007.

Bottom Line: From an absolute level, building permits and housing starts are still far below historical levels as the chart above clearly shows, and we have a long way to go before residential construction returns to historical averages of about 1,400,000 for both permits and starts.  But what matters most are the relative, marginal changes in construction activity, and the changes at the margin clearly point to a recovery in housing construction. From the cyclical lows of 478,000 for housing starts in April 2009 and 513,000 for permits in March 2009, construction activity has increased significantly (87% for starts and 69% for permits), and we have definitely moved past the 2009-2010 bottom into a new cycle of recovery.

As Scott Grannis commented yesterday in his post about the recovery in the housing market, “…on the margin, there have been some very important improvements in the housing market over the past 18 months. It’s hard for me to believe that these changes are ephemeral—they have all the makings of a clear turnaround that is underway and likely to continue.”

15 thoughts on “Building permits and housing starts in October were highest since 2007, with huge gains of 30% and 42% vs. last year

  1. Told ya! As predictable as the sun rising in the morning!


    Now the denialists are forced to change the subject, too. As if housing starts and permit applications has anything to do with the consumer price index!

    *laughs again*

    • Hey genius, housing starts and permits measure numbers of houses started and permits filed. It doesn’t even involve a dollar figure. You’re taking stats on numbers of units being built and planned and, somehow, bizarrely, thinking that has something to do with prices. Classic topic change, in order to hold onto some sense of denial.

      • And I have pointed out before that I have mostly been reporting the HUGE increases in HOME SALES compared to last year. The unit of analysis is “houses sold” and that measure has nothing to do with home prices or inflation, or anything measured in dollars.

        Even with flat prices, we have been seeing huge increases in home sales, and therefore large increases in housing SALES VOLUME. When retail sales increase by 30%, we consider it a boom in consumer spending. Likewise for a 30% increase in housing sales volume.

        Also, we keep seeing decreases in the average market time (days on the market), and increases in the “sale price to list price” ratio, which are more signs of a housing rebound.

        Forget home prices and forget the fringe, tinfoil hat conspiracy stories of CPI miscalculation, and you still have a housing recovery unfolding.

      • mark-

        you have also been consistently trumpeting huge price gains, mostly due to using median figures as opposed to the like to like comparisons from guy like CS. i’m not sure it’s really fair to say you have been MOSTLY reporting just sales figures.

        further, scott’s piece that you cite clearly led off speaking about prices (among other things) as well.

        i’m not sure you can use time on market or sale price to list price as indicators of a recovery. i grant that they COULD be, but they could also be a reflection of sellers listing at more realistic prices and buyers moving more quickly as a result. a drop in list prices would look like the same thing.

        i actually agree that there is a recovery going on and i think that nominal matters more than real as that is what will dig out all the negative equity, but i also think we are looking at a 2ish % gain in price, not the double digit stuff the NAR is talking about.

        it seems to be roughly pacing cpi at the moment.

        the elephant in the room seems to be “what will happen if rates go up” as twist expires at year end and or zirp and qe3 get wound down at some point?

        the FHA has slid into negative equity which will make it difficult to for them to pursue new initiatives.

        i also wonder how many high end properties are being rushed to sale before year end to beat the cap gains hike? (which is a killer on second homes)

        anecdotally, i have heard a lot of chatter about that, but i have no idea how much it is driving the market.

        at the moment, housing does seem to be getting a bit better, i just worry about how durable such gains will prove when the dramatic monetary tail winds subside as the must at some point.

      • “ven with flat prices, we have been seeing huge increases in home sales, and therefore large increases in housing SALES VOLUME. When retail sales increase by 30%, we consider it a boom in consumer spending. Likewise for a 30% increase in housing sales volume. ”

        i’m not sure this is the right way to look at it. %’s can be very misleading this way.

        if you owned a stock at $100 that dropped to ten, would the move to 13 (up 30%) be a “boom”?

        i certainly would not describe it that way.

        if trading volume in perrycorp was a a 2.3 million shares a day and then dropped to 500k, is the rise to 900k a boom?

        i think the absolute levels matter a great deal here.

        this is not boom in housing sales. it’s a slow recovery from a very depressed level.

        using big % figures does not really alter that.

        even in 1992 when US population was nearly 20% less than today, this would have been a bad number for housing starts.

        using the high % numbers that are easy to create after a deep drop to call slow recovery a boom seems to be an overly aggressive way to describe the situation.

        recovery, yes. boom? no.

        taking back 20-25% ish of a drop over 4 years hardly seems to meet any definition of boom with which i am familiar.

  2. Fixated on fixed market baskets? A conspiracy seen in every cornucopia? Bart says: “The medical cost component of CPI-U is about 7% of its total. GDP medical costs are about 17% of total GDP.” CPI-U looks at a marketbasket of goods and services and their share in the typical urban consumer’s budget not their share of GDP. Since the bulk of medical costs fall on federal and state governments (over 50%) and the remainder falling on businesses and individuals a 7% weighting is very fair.

    • CPI is a measure of what the consumer directly faces. The weighting reflects the actual percentage of medical expenses directly borne by individual consumers.

      • The CPI measures direct spending by consumers to construct the index. Since 1965 the proportion of medical care directly borne by the consumer has declined by about 50%. If we tried to recapture that we would alter what the CPI is supposed to measure. Now, does the typical consumer forego wage income for benefits? Of course, but that should be measured to the degree that price pressures employers face in constructing a benefit package to retain and attract employees and how much that dampens cash wage growth. That would be a useful index but it would not be an inflation index but a true breakout of how a single industry, healthcare, may impact overall cash wage growth rates. That dampening factor could be used by policymakers to change how certain benefits are treated for tax purposes and how perhaps how health risks are hedged generally through government and private insurers.

    • The notion of a conspiracy is contained in the site shadowstats. There a variety of measures of CPI are simply shifted. If there were actual errors the two measures BLS and Shadowstats would not be highly correlated. Therefore they are measuring the same phenomena but a simple factoral shift is not evidence of anything approaching a systematic error as is claimed.

  3. Let’s see what Calculated Risk actually said.

    “Note: new home sales are reported when contracts are signed, so it is appropriate to compare sales to starts (as opposed to completions). This is not perfect because of the handling of cancellations, but it does suggest the builders are keeping inventories under control, and also suggests that the year-over-year increase in housing starts is directly related to an increase in demand and not renewed speculative building.”

    OOPS! It’s useful to actually read your own source!

    • LOL!! You’re just pathetic dude!

      “You also very conveniently ignored what he actually said about overbuilding:
      “Now it looks like builders are starting a few more homes than they are selling, and the inventory of under construction and completed new home sales increased slightly to 122,000 in Q3″ “

      You conveniently ignored that little passage in parentheses right after your own quote!

      “(this is still near record lows)”

      Wow! We must be overbuilding because inventories of under construction and completed homes are near record lows! LOL!!!!

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