December 2018 Residential Building Mixed

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

Analyst Opinion of Residential Building

The backward revisions this month were slight. 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 improving and completions rate of growth now slowing.

Overall, 2018 permits and completions were higher than in 2017.

We consider this report little changed 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.

(Click on image to enlarge)

  • Unadjusted Construction completions are higher than permits.
  • Unadjusted 3-month rolling averages for permits (comparing the current averages to the averages one year ago) is +1.8 % (permits) and -5.1 % (construction completions):

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

(Click on image to enlarge)

Econintersect Analysis:

  • Unadjusted Building permits growth decelerated 1.7 % month-over-month and is up 2.5 % year-over-year.
  • Unadjusted Single-family building permits is down 5.5 % year-over-year.
  • Unadjusted Construction completions decelerated 8.1 % month-over-month, down 8.6 % year-over-year.

US Census Headlines:

  • building permits up 0.3 % month-over-month, up 0.5 % year-over-year
  • construction completions down 2,7 % month-over-month, down 38.4 % year-over-year.
  • the market expected (from Econoday):

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. 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)

(Click on image to enlarge)

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

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