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.”