October 2018 Residential Building Slowed -

October 2018 Residential Building Slowed

Nov 20, 2018Jeremy ParkinsonFinance0

The headline residential building permits slowed and construction completions slowed relative to last month. But we keep our eyes on the rolling averages which confirms the slowing trend.

Analyst Opinion of Residential Building

The backward revisions this month were slightly upward.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 – and it shows permits rate of growth slowing and completions rate of growth now slowing.

We consider this a weaker report relative to last month.

Over time, there is little difference between using permits or starts to compare to completions. Note that this month housing starts improved relative to last month.

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

Unadjusted Construction completions are greater than permits.

Unadjusted 3 month rolling averages for permits (comparing the current averages to the averages one year ago) is -1.9 % (permits) and +3.2 % (construction completions):

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

Building Permits Construction Completions Current Movement decelerating decelerating

Econintersect Analysis:

Unadjusted Building permits growth accelerated 0.6 % month-over-month and is down 1.3 % year-over-year.

Unadjusted Single-family building permits is up 4.5 % year-over-year.

Unadjusted Construction completions decelerated 11.2 % month-over-month, down 6.5 % year-over-year.

US Census Headlines:

building permits down 0.6 % month-over-month, down 6.0 % year-over-year

construction completions down 3.3 % month-over-month, down 6.5 % year-over-year.

the market expected (from Econoday):

Annual Rates Consensus Range Consensus Actual Housing Starts 1.180 M to 1.269 M 1.240 M 1.228 M Housing Permits 1.224 M to 1.285 M 1.260 M 1.263 M

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

When more building permits are issued than residences completed – the industry is expanding – and this expansion was underway for three years (except for the last two months in 2014). In the graph below, any value above zero shows more permits are being issued than completions.