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Permit Data Show Homebuilding Recovery Continuing
Jonathan Smoke / Hanley Wood / September 18, 2013
The initial read on August permits and starts showed no evidence of single family construction being derailed by the increase in mortgage rates since May. Permits, which lead starts, were at a total level in line with most economists’ expectations. Single family permits were at the highest seasonally adjusted rate since May 2008. While the total starts number was down, the decline was caused by declines in the more volatile multi-family sector, and in fact single family starts were up 7% in August over July.
We work with more detailed market level permit data from the Census and from our own data gathered directly from permitting jurisdictions. The data is slightly older (through July) but it supports two very important observations: on a non-seasonally adjusted basis the slight decline we are seeing in July is a normal seasonal slowdown as what is permitted now has very limited chances of being completed before the end of the year; and there are enormous differences on a market by market basis in both single family and multifamily.
Here are some local observations from permitting data reported through July:
- The majority of markets are seeing increases in permits. Of 783 MSAs across the country included in the Census permit data, 458 or 58% demonstrated year-over-year growth in single family permits for July 2013 while 422 or 54% showed a year-to-date increase over the same period in 2012.
- In looking at SF permit volume across the MSAs, 17% comprise 80% of the total permits, both for the month of July and for the 12-month period ending in July.
- Below are top annual volume rankings as of July 2013 by MSA:
- Despite a slight decrease in the national three month moving average, over half of the MSAs maintained or improved their average in July with 39% of MSAs showing single family permit jumps. Some of the highest growth MSAs are as follows:
- The top five markets in volume all showed minor decreases in the moving average, ranging in a drop from 2-4%, which is a reflection of the national performance. The two MSAs in the top ten for annual volume that had positive growth are Orlando, FL and Austin, TX at 4% and 5%. The highest-ranked MSA in annual volume showing an improved average in double digits is Denver, CO which ranks 15th in volume and had an increase of 17% in its moving average.
- Raleigh, NC felt the largest decline in the three-month moving average out of the top ten volume leaders with a drop of 8%, while Tampa and Las Vegas also experienced recent slowdowns as they appear in the top fifteen MSAs for annual volume but showed a moving average decline of 9% and 10%, respectively.
- Multifamily permits are more concentrated in volume, with 8% of MSAs comprising 80% of the annual permit volume for the 12-month period ending in July. Of the 783 MSAs covered nationally, 24% or 188 showed year-over-year permit growth in July while 35% or 274 showed a year-to-date increase over the same period in 2012.
- Multifamily permits experienced a larger decrease nationally for the three-month moving average at almost a 6% drop, even though four of the top five volume leaders in annualized permits showed increases. The difference we see here is that only 22% of MSAs had an increase in average for the most recent three months, while in single family permits, 39% of MSAs showed an improvement in the three-month average. As with the annual volume, it is a more concentrated collection of market areas driving multifamily growth but those growth areas cannot fully compensate for the majority of areas that are not performing as strongly, along with some of the top markets feeling more significant slowdowns than in single family.