Building Permits Jump 16.7% in December. Asterisk Noted in Data
The U.S. Census Bureau and the Department of Housing and Urban Development have released New Residential Construction statistics for December 2010.
Housing Starts data estimates how much new residential real estate construction occurred in the previous month. New construction means digging has begun. Adding rooms or renovating old ones does not count, the builder must be constructing a new home (can be on old foundation if re-building). Although the report offers up single family housing, 2-4 unit housing, and 5-unit and above housing data, single family housing is by far the most important as it accounts for 70-80% of total home building (which might be shifting more toward multi-family in the years ahead).
Building Permits data provides an estimate on the number of homes planning on being built. This indicator basically tracks how much future construction activity we should expect to take place in the future. This data is a part of Conference Board's Index of Leading Economic Indicators.
Reuters Quick Recap...
RTRS-US DEC HOUSING STARTS -4.3 PCT VS NOV +3.8 PCT (PREV +3.9 PCT)
RTRS-US DEC HOUSING STARTS 529,000 UNIT RATE (CONSENSUS 550,000) VS NOV 553,000 (PREV 555,000)
RTRS-US DEC HOUSING PERMITS +16.7 PCT VS NOV -1.4 PCT (PREV -1.4 PCT)
RTRS-US DEC HOUSING PERMITS 635,000 UNIT RATE (CONSENSUS 555,000) VS NOV 544,000 (PREV 544,000) 08:30 19Jan11
RTRS-US DEC HOUSING COMPLETIONS +4.1 PCT TO 585,000 UNIT RATE VS NOV 562,000
Excerpts from the Release...
BUILDING PERMITS
Privately-owned housing units authorized by building permits in December were at a seasonally adjusted annual rate of 635,000. This is 16.7 percent (±2.1%) above the revised November rate of 544,000, but is 6.8 percent (±2.8%) below the December 2009 estimate of 681,000.
Single-family authorizations in December were at a rate of 440,000; this is 5.5 percent (±2.3%) above the revised November figure of 417,000. Authorizations of units in buildings with five units or more were at a rate of 172,000 in December.
HOUSING STARTS
Privately-owned housing starts in December were at a seasonally adjusted annual rate of 529,000. This is 4.3 percent (±14.1%)* below the revised November estimate of 553,000 and is 8.2 percent (±14.4%)* below the December 2009 rate of 576,000.
Single-family housing starts in December were at a rate of 417,000; this is 9.0 percent (±11.7%)* below the revised November figure of 458,000. The December rate for units in buildings with five units or more was 102,000.
HOUSING COMPLETIONS
Privately-owned housing completions in December were at a seasonally adjusted annual rate of 585,000. This is 4.1 percent (±17.7%)*above the revised November estimate of 562,000, but is 22.2 percent (±11.3%) below the December 2009 rate of 752,000.
Single-family housing completions in December were at a rate of 463,000; this is 5.5 percent (±15.3%)* above the revised November rate of 439,000. The December rate for units in buildings with five units or more was 111,000.
Plain and Simple: An 80% jump in the Northeast region and a 44% spike in the West are responsible for the uptick in Building Permits. Digging deeper, the mulit-family sector was the main source of improvement in Building Permits data. The same can be said about Housing Starts, the multi-family sector was the only source of strength. Single-family starts fell 9.0% in December. In regard to Housing Completions, we need to see a continued run off of Housing Units Under Construction into the Housing Completions category before we can get too excited about sustained growth in new construction numbers. You know what I'm talking about...all those homes out there that were started but never finished because the builder ran out of funding or just gave up after demand for new homes tanked and prices plummeted. Knock 'em down?
Wait wait wait......forgot to mention the asterisk placed on building permits data by the Commerce Department:
"Increases in the numbers of housing units authorized by building permits in the Northeast and West in December 2010 may be related to changes to state building codes for new residential construction effective in January 2011 in California, Pennsylvania, and New York."
That explains the 80% and 44% jump in permits seen in the Northeast and West, respectively.....
Look at the charts above, new construction is still stagnant near record low levels of activity.