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June 2019 Residential Building Growth Continues To Slow Year-Over-Year

Summary

Many pundits are predicting an improvement in growth for new residential construction - but this prediction is not evident yet.

New residential construction sector again slowed in June 21.

This sector is now in contraction.

The headline residential building permits and construction completions slowed relative to last month. This sector is contracting year-over-year.

The backward revisions this month were modest. It is always difficult to understand the trends as the backward revisions continue to reverse trends month-to-month. The nature of this industry normally has large variations from month-to-month (mostly due to weather) so the rolling averages are the best way to view this series.

In summary, the rolling averages say this sector continued to slow this month.

We consider this report worse than last month.

Over time, there is little difference between using permits or starts when one compares to completions.

Looking at residential construction employment, the year-over-year growth of employment has a reasonable correlation with housing starts.

Econintersect Analysis:

  • Unadjusted Construction completions are lower than permits.
  • Unadjusted 3-month rolling averages (comparing the current averages to the averages one year ago) is -3.7 % (permits) and +0.5 % (construction completions):

3 month Rolling Average for Year-over-Year Growth Unadjusted Data

Building Permits Construction Completions
Current Movement decelerating decelerating

  • Unadjusted Building permit growth decelerated 8.9 % month-over-month and is down 9.5 % year-over-year.
  • Unadjusted Single-family building permits are down 9.4 % year-over-year.
  • Unadjusted Construction completions decelerated 2.1 % month-over-month, down 4.9 % year-over-year.

US Census Headlines:

  • building permits down 6.1 % month-over-month, down 6.6 % year-over-year
  • construction completions down 4.8 % month-over-month, down 3.7 % year-over-year.
  • the market expected (from Econoday):
Annual Rates Consensus Range Consensus Actual
Housing Starts 1.218 M to 1.280 M 1.260 M 1.253 M
Housing Permits 1.251 M to 1.305 M 1.300 M 1.220 M

Note that Econintersect analysis herein is based on UNADJUSTED data - not the headline seasonally adjusted data.

In the graph below, any value above zero shows more permits are being issued than completions.

Difference Between New Home Building Permits and Construction Completions (unadjusted)

Although the data is noisy - the trends vary depending on the periods selected - but the short term trends show slowing in this sector.

Unadjusted Year-over-Year Change New Homes - Permits (blue line) and Construction Completions (red line)

Other points to take away from the data:

  • Before we start thinking all is well, the residential home industry is less than half of the pre-2005 peak.

Seasonally Adjusted Residential Building Permits

  • Apartments accounted for 28.7 % of all building permits.

Unadjusted Ratio Apartment Permits (structures with 5 or more units) to Total Permits - a higher number means more Apartments

Please visit our landing page for a summary of all of our analysis this past week.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.