Mortgage News in the Carolinas
Posts tagged Building Permits
Finding Truth In September’s Housing Starts Report
0213 days
by Geoff Brown
in Housing Analysis
Headlines in newspapers can be misleading — especially with respect to housing figures. Media coverage of the most recent Housing Starts data serves as an excellent illustration.
Wednesday, the Census Bureau released its September Housing Starts report. In it, the government said that national Housing Starts rose 15 percent in September as compared to August 2011, tallying 658,000 units on a seasonally-adjusted annualized basis.
The September reading is the highest monthly reading since April 2010, the last month of last year’s home buyer tax credit.
The sudden surge in starts is big news for a housing market that has struggled of late, and the press was eager to carry the story. Here is a sampling of some headlines:
- U.S. Housing Starts Rise 15%, Hit 17-Month High (MarketWatch)
- Home Building Jumps 15% in September (ABC)
- New Construction Surges In September (LA Times)
These headlines are each accurate. However, they’re also misleading.
Yes, Housing Starts did surge in September, but if we remove the “5 or more units” grouping from the Census Bureau data — the catgory that includes apartment buildings and condominium structures — we’re left with Single-Family Housing Starts and Single-Family Housing Starts rose just 1.7 percent last month.
That’s a good number, but hardly a great one. And for home buyers and sellers throughout Charlotte and nationwide, it’s the Single-Family Housing Starts that matter most. Individuals like you and I don’t buy entire apartment buildings. Most often, we buy single-family homes. Therefore, that’s the data for which we should watch.
The good news is that media tales work in both directions.
Building Permits dropped 5 percent last month when the volatile 5-unit-or-more-units category was included from the math. Isolating for single-family homes, we find that permits were unchanged.
This is good housing because 82% of homes begin construction within 60 days of permit-issuance, hinting at a steady, late-fall housing market.
Building Permits Fade Faster Than Expected
0368 days
by Geoff Brown
in Housing Analysis
Single-family housing starts dropped by 21,000 units in April on a seasonally-adjusted annual basis.
The Housing Starts report measures the number of homes on which new construction “broke ground”. It’s tracked by the U.S. Department of Commerce which releases new data monthly.
Single-family housing starts fell 5 percent as compared to March 2011, and 30 percent as compared to April one year ago.
The figures were worse than what Wall Street expected. For just the second time in 2 years, monthly single-family housing starts dropped below 400,000 units. In addition, single-family Building Permits fell in April as well, shedding 2 percent from March.
A building permit is a local government’s approval to start home construction and when permits are down, new construction follows. This is because 93 percent of homes begin construction within 60 days of permit-issuance.
Fewer permits, as a consequence, means fewer new homes. Therefore, if you’re looking at new construction in or around Charlotte , April’s numbers may spark a sense of urgency.
Home prices are a function of home supply and demand and, based on the Housing Starts data, supplies appear headed for a fall. Meanwhile, on the other side of the equation, demand should be rising — foot traffic is higher, mortgage rates are lower, and job growth is picking up.
This should lead new home prices higher in time. For now, though, home affordability remains high.
It’s a good time to look at new home construction.
Building Permits Rise In All 4 Regions
0396 days
by Geoff Brown
in Housing Analysis
According to the Census Bureau, seasonally-adjusted, single-family Housing Starts rebounded in March, increasing 8 percent over February’s 2-year low.
We can’t put too much faith in the data, however, because for the second straight month, the government reports that the data’s margin of error — 15 percent – exceeds its actual measurement.
As written in the footnotes, there’s no “statistical evidence to conclude that the actual change [in Housing Starts] is different from zero.”
In other words, single-family Housing Starts may have dropped up to 7 percent last month, or may have increased by as much as 22 percent. We won’t know for certain until several months from now. As the Census Bureau gathers more data, it will revise its initial monthly findings.
Such adjustments are common. February’s starts were revised higher by 4.5%, for example.
Also included in the Census Bureau’s report is the March 2011 Building Permits tally. As compared to February, permits were higher by 6 percent nationwide. This is a noteworthy development because permits-issued is an excellent forward-predictor for housing.
When permits are issued, 86 percent of them will start construction within 60 days. This means that new home sales and housing stock should follow the Building Permits report trend, but on a 2-month delay.
Permits were strong in all 4 regions last month:
- Northeast : +2.6 percent from February
- Midwest : +10.0 percent from February
- South : +5.3 percent from February
- West : +5.3 percent from February
With Building Permits rising, we can infer that the housing market is improving.
Therefore, if you’re currently looking for new construction, consider that the market may be less favorable for buyers 4-6 months from now than it is today. Especially because homebuilders are already projecting higher sales volume.
The better time to buy new construction — relative — may be now.
Housing Starts Data Much Better Than The Headlines Would Have You Believe
0549 days
by Geoff Brown
in Housing Starts
Newspaper stories can be misleading sometimes — especially with respect to real estate. We saw a terrific example of this Wednesday.
A “Housing Start” is a privately-owned home on which construction has started and, according to the Commerce Department’s October 2010 data, Housing Starts data dropped by nearly 12 percent as compared to September.
The media jumped on the story, and its negative implications for the housing market overall.
A sampling of the headlines included:
- Housing Starts Plunge: Market’s ‘Pulse is Faint’ (WSJ)
- Housing Starts Tumble (Reuters)
- Housing Starts Sink 11.7 Percent In October (NPR)
Although factually correct, the headlines are misleading. Yes, Housing Starts fell sharply in October, but if we strip out the volatile “5 or more units” portion of the data — a grouping that includes apartment buildings and condominiums — Housing Starts only fell 1 percent.
That’s a big difference. Especially because most new construction buyers in Charlotte and around the country don’t purchase entire condo buildings. They buy single-family residences.
As an illustration, 84% of October’s Housing Starts were single-family homes. The remaining starts were multi-units.
This is why the headlines don’t tell the whole story. The market that matters most to buyers — the single-family market — gets completely glossed over. The Housing Starts reading wasn’t nearly as awful as the papers would have you believe. Furthermore, it’s never mentioned that single-family Housing Permits climbed 1 percent last month, either.
According to the Census Bureau, 82% of homes start construction within 60 days of permit-issuance. Therefore, we can expect December’s starts to be higher, too.
