Housing Permits At 1,881,000!

Is that a typo? 1,881,000 housing permits, no way!

From Census: https://www.census.gov/construction/nrc/pdf/newresconst.pdf

Building Permits

Privately-owned housing units authorized by building permits in January were at a seasonally adjusted annual rate of 1,881,000. This is 10.4 percent (±1.2 percent) above the revised December rate of 1,704,000 and is 22.5 percent (±1.8 percent) above the January 2020 rate of 1,536,000. Single-family authorizations in January were at a rate of 1,269,000; this is 3.8 percent (±0.9 percent) above the revised December figure of 1,223,000. Authorizations of units in buildings with five units or more were at a rate of 557,000 in January.

Housing Starts

Privately-owned housing starts in January were at a seasonally adjusted annual rate of 1,580,000. This is 6.0 percent (±16.4 percent)* below the revised December estimate of 1,680,000 and is 2.3 percent (±13.9 percent)* below the January 2020 rate of 1,617,000. Single-family housing starts in January were at a rate of 1,162,000; this is 12.2
percent (±11.3 percent) below the revised December figure of 1,323,000. The January rate for units in buildings with five units or more was 402,000.

Housing starts data month to month can be wild, but the trend is your friend, and the one housing data that hasn’t moderated yet has been housing permits.

Always remember, extremely positive or negative housing reports tend always to get corrected back to the trend. However, even though housing starts fell, this report still shows the same story for many years. We are working our way to start a year at 1,500,000 total housing starts. In the previous expansion, I had two calls that went with my theme that housing would have its weakest recovery every from years 2008-2019. One was that purchase application data will never hit 300 until years 2020-2024. That has already been checked off. Purchase application data is not only above 300 now, but so far in 2021, the year-over-year growth in this data line is doing better than my peak rate of growth forecast. I was looking for a peak rate of growth of 11% year over year until March 18th, and we are running at 13.1%.

From Calculated Risk:

The second call was that housing starts would never start a year at 1,500,000 until 2020-2024. We haven’t accomplished that goal yet, but we are heading in that direction; last year, annual housing starts were at 1,380,000. Unlike other people, I actually don’t believe in a housing construction boom, just because mature economies of age, unless they believe in deficit financing for housing, limit what they can build because of demand. 5% mortgage rates shut down the growth of housing starts back in 2018, and we spent the entire year of 2019 getting rid of the excess supply in housing to be roughly flat in housing starts growth for the year.

Right now, mortgage rates are too low to bother the new home sales market much, as the monthly supply of new homes is at 4.3 months. Rule of thumb always, As long as the monthly supply levels is at 4.3 months and below, the builders will be delighted; things are ok between 4.4 – 6.4 months. Anything above 6.5 months, the builders will pull back.

This is the reason why the builder’s confidence is so high. Please don’t put too much weight on lumber prices; it’s always about monthly supply.

From AdvisorPerspective:

As long as you know housing construction in America has limits, and when mortgage rates rise, this sector will cool down, you will be fine. Slow and steady wins the race. Our Demographics are good for housing in the years 2020-2024. However, it favors more the existing home sales market than it does the new home sales market. Don’t be surprised if the next housing starts report has a cool down in permits; this was an abnormally high print from the trend.

Logan Mohtashami is a Lead Analyst for Housing Wire, financial writer, and blogger covering the U.S. economy with a specialization in the housing market. Logan Mohtashami, now retired, was a senior loan officer at AMC Lending Group, which has been providing mortgage services for California residents since 1987.