Housing Bubble No Longer Expanding

It does appear that the housing bubble is, if not bursting, at least no longer expanding. For the second month in a row data from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development indicates that builders at least are pulling back from the enthusiastic pursuit of home building opportunities that had been their pattern for several years.

In figures released on May 16, the joint survey revealed that building permits in April fell 5.4 percent from the revised March rate of 2,097,000 to an estimated total of 1,984,000. This is an 8 percent drop from the April 2005 estimate of 2,156,000 and 10.8 percent lower than the recent high-water mark of 2,221,000 permits issued in September 2005. Preliminary March figures (which were subsequently upgraded slightly from 2,059,000 to 2,097,000) had initially been reported as running 5.5 percent below the revised figures for February.

Single family home applications make up the bulk of permits and these were issued at a rate of 1,502,000 in April, a drop of 4 percent since March and down from 1,654,000 permits (9 percent) issued one year earlier.

Actual housing starts in April were at a seasonally adjusted estimated rate of 1,849,000, a drop of 7.4 percent from the revised March estimate of 1,996,000. Preliminary March figures had surprised most experts by coming in 7.8 percent higher than the revised February figures and over 23 percent higher than the figures in March, 2005 so some decline in this figure was anticipated. Housing starts, it must be noted, reflect the implementation of plans made much earlier and may be an indication that builders, with subcontracts and funding in place, are now being propelled along a trajectory they are unable to moderate. There was only a very small decline of 0.5 percent from March to April in the number of homes permitted for which construction was not started.

Housing completions dropped from 2,223,000 in March to 2,077,000, a 6.6 percent decline. This is still 8 percent above the April 2005 completion rate of 1,923,000.

The number of housing units under construction in April, 1,388,000, was the lowest since September of last year and was down 1.6 percent from April of 2005

There were substantial regional variations in the numbers released. The drop in permits issued was highest in the Midwest at -12.9 percent although single family permits were only down 5.5 percent. The West had a tiny 0.4 percent decline in permits. The Midwest also had the largest decline in homes permitted but not started at 10.7 percent from March to April; the other three regions showed declines of less than 5 percent.