September 2017 Residential Building Slowing Cycle Continues

The headline residential building permits declined and construction completions improved. But we keep our eyes on the rolling averages because of the significant monthly fluctuations.

Analyst Opinion of Residential Building

The backward revisions this month were strongly downward.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 declined, and completions rate of growth declining.

We consider this a weaker report than last month – and shows growth deceleration.

Looking at residential construction employment, the year-over-year growth of employment is almost correlating with housing starts.

The unadjusted rate of annual growth for building permits in the last 12 months has been around 10% – it is -6.7 % this month.

Unadjusted Construction completions are about equal to permits – which indicates an flat sector.

Unadjusted 3 month rolling averages for permits (comparing the current averages to the averages one year ago) is +3.3 % (permits) and +8.4 % (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 decelerated 17.0 % month-over-month, and is down 6.7 % year-over-year.

Unadjusted Single family building permits is up 4.6 % year-over-year.

Unadjusted Construction completions accelerated 4.6 % month-over-month, up 10.1 % year-over-year.

US Census Headlines:

building permits down 4.5 % month-over-month, down 4.3 % year-over-year

construction completions up 1.1 % month-over-month, up 10.3 % year-over-year.

the market expected (from Bloomberg / Econoday):

Annual Rates Consensus Range Consensus Actual Housing Starts 1.150 M to 1.210 M 1.170 M 1.127 M Housing Permits 1.190 M to 1.280 M 1.230 M 1.215 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.