Building Permits Fade Faster Than Expected
by Jeff Underwood on May.18, 2011, under Real Estate
Single-family housing starts dropped by 21,000 units in April on a seasonally-adjusted annual basis.
The Housing Starts report measures the number of homes on which new construction “broke ground”. It’s tracked by the U.S. Department of Commerce which releases new data monthly.
Single-family housing starts fell 5 percent as compared to March 2011, and 30 percent as compared to April one year ago.
The figures were worse than what Wall Street expected. For just the second time in 2 years, monthly single-family housing starts dropped below 400,000 units. In addition, single-family Building Permits fell in April as well, shedding 2 percent from March.
A building permit is a local government’s approval to start home construction and when permits are down, new construction follows. This is because 93 percent of homes begin construction within 60 days of permit-issuance.
Fewer permits, as a consequence, means fewer new homes. Therefore, if you’re looking at new construction in or around Phoenix , April’s numbers may spark a sense of urgency.
Home prices are a function of home supply and demand and, based on the Housing Starts data, supplies appear headed for a fall.
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