July 2015 Residential Building Sector Permits Significantly Slows

Be careful in looking at this data set with a microscope as the potential error ranges and backward revisions are significant. Also the nature of this industry causes variation from month to month. But the July data was not good. Using 3 month rolling averages likely is the best way to view this series – and still the data remains in the range we have seen over the last 3 years.

 

• The unadjusted rate of annual growth for building permits in the last 12 months has been around 10% – it is 3.9% this month. This slowdown is largely attributable to multi-family homes.
• Unadjusted 3 month rolling averages for permits (comparing the current averages to the averages one year ago) show that construction completions are lower than permits this month for the seventh month in a row.

3 month Rolling Average for Year-over-Year Growth Unadjusted Data

Unadjusted 3 Month Rolling Average of Year-over-Year Growth – Building Permit (blue line) and Construction Completions (red line)

 

Econintersect Analysis:

• Building permits growth decelerated 36.2% month-over-month, and is up3.9% year-over-year.
• Single family building permits accelerated 6.1% year-over-year – so permit growth slowdown is from multi-family.
• Construction completions accelerated 2.6% month-over-month, up 18.9% year-over-year.

US Census Headlines:

• building permits down 1.1% month-over-month, up 7.5% year-over-year
• construction completions up 2.4% month-over-month, up 14.6% year-over-year.
• the market expected (from Bloomberg):

Note that Econintersect analysis herein is based on UNADJUSTED data – not the headline seasonally adjusted data.

When more building permits are issued than residences completed – the industry is expanding – and this expansion was underway for three years (except for the last two months in 2014). In the graph below, any value above zero shows more permits are being issued than completions.