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2013 Year to Date Regional Permit Analysis
Jonathan Smoke / Hanley Wood / June 18, 2013
The preliminary data on permits in May from the Commerce Department reflected activity close to the pace reported in April (down 3.1%) but that was slightly better than most economists were expecting. We think the pace of activity so far this year is more or less what we will see for the year as builders are intentionally limiting growth to maintain pricing power while shoring up future lot capacity. If our thesis is true, it makes sense to see what more detailed data available through April tells us about new residential construction in 2013.
Here are the key observations:
- Growth so far is significant with total permits up 29% YTD through April
- Since permits lead starts, we expect the pace of starts to increase as the year progresses
- Single family is growing at the same pace as multifamily, representing that the single family market is really heating up
- Several states are up more than 50% over last year: California, Florida, Kansas, Nebraska, Oregon, and South Dakota
- The 5 biggest states represent traditional high growth regions: Texas, Florida, California, North Carolina, and Georgia
All four regions across the U.S. experienced jumps in single family (SF) permits through April 2013, with regional YTD growth starting at 17% for the Northeast. The West continues its strong recovery by leading with 38% year-over-year gains carried by growth in both the Mountain and Pacific divisions at 34% and 44% respectively. Across individual states, South Dakota leads the way with 66% growth thanks to a booming oil industry creating an influx of new residents.
The South region is dominant in new SF permit volume with 103,136 YTD for 2013, more than doubling the counts for any of the other three regions. The South Atlantic division comprises 52% of SF permits in the region with Florida continuing to strengthen its markets and leading the Southern states at 17,704. At the state level independent of regions, Texas tops the chart for 2013 permits with 29,182.
Multifamily (MF) permits are also up across all regions, with growth here stabilizing while SF growth has accelerated to match the pace of MF growth over the same period last year. The Midwest shows the fastest MF growth across regions with a 51% increase, helped by the red-hot South Dakota market which falls behind only Rhode Island in state growth rate but has over 96% more permit activity.
Regional permit volume is again dominated for MF by the South with 152,560 new permits for 2013. Also following the SF trends, the South Atlantic division accounts for over half of those permits with Florida leading the way at 30,085. For standalone volume by state, Texas rises to the top with 46,975 new MF permits reflecting its markets that lead the country in new construction.
Total permits for 2013 grew 29% over the same period last year with both SF permits and multifamily permits matching the national growth rate. Year to date, 2013 has shown to be the first year in recent history with the growth of SF permit issuance keeping pace with MF permit growth, and continued SF gains are expected at a healthy rate with an improving economy and rising demand for new homes.