Housing Starts Up; Permits Down
The Census Bureau released the September 2010 new residential construction statistics — the housing starts report — this morning. The housing starts report tracks new building permits, new construction starts, and newly completed homes. These are used together as a leading economic indicator.
The report was a bit of a mixed bag—there were slight ticks up in both completions and starts (7.3% and 0.3%, respectively) from August estimates, while new permits dropped 5.6% from August estimates.
This has been the continuation of a steady decline during the current real estate collapse, and it appears that the slight lag between the drops in permits and starts is now catching up with the rates of completed new homes. The length of time from start to completion averages to just under eight months, so we can expect anemic levels of new construction at least through the first half of 2011.
The estimates have been bouncing around a bit in the past year, but overall, we’re still in the midst of the slowest construction market in 50 years.
While this is just another shot of lousy news for the economy at large, optimists can at least try to see it as a sign that the real estate market is acting rationally. There’s currently an oversupply of homes on the market now or soon to be on the market (both the shadow market of sellers who can afford to wait it out a bit and all the foreclosures in the pipeline) so it makes sense that producers are slashing construction. We should definitely expect the housing starts to stay at or near these historic lows for some time to come.