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Building Permits Reach Their Highest Level in a Decade

Homebuilding across the U.S. rose to a high led by increased activity in single-family housing construction, in what is being seen as a good start to the housing market. According to data on housing starts and building permits for January 2018 released by the U.S. Census Bureau [1] on Friday, building permits for residential construction rose 7.4 percent month over month as well as year over year to 1.39 million units.

The data [2] indicated that at 866,000 units single-family authorizations in January were 1.7 percent below the revised December figure of 881,000 units. However, on an annual basis, authorizations increased by 10.5 percent.

“2017 was the strongest year for homebuilding since 2007. Building permits were the highest in a decade as builders responded to the high demand. Builder confidence is high and construction jobs are increasing. All these are encouraging signs for the market,” said Tendayi Kapfidze, Chief Economist at LendingTree.
Housing starts in January rose 9.7 percent to 1.39 million units, exceeding the revised December estimate of 1.2 million units. On a year-over-year basis, housing starts increased 7.3 percent above the January 2017 rate of 1.23 million units.

“The rise in permits, the leading indicator of housing starts, in conjunction with the rise in construction employment this month, signals an upward trajectory for housing starts in 2018. Based on the data this month, construction employment has eased as a headwind to housing starts,” said Mark Fleming, Chief Economist at First American.

Looking to the year ahead, Kapfidze said that it was best to view this data as a three-month average to smooth out volatility and balance the information value. “The 3-month average of single-family starts of 893,000 is at its highest level since the financial crisis,” Kapfidze said.

Housing completions in January were at 1.16 million units, decreasing 1.9 percent on a month over month basis, but were 7.7 percent higher on a year-over-year basis. Single-family housing completions in January increased 2.2 percent to 850,000 on a month-over-month basis.
“Housing completions, the number of net new homes added to the housing stock, increased dramatically compared with a year ago. This signals some relief for the supply shortage,” Fleming said.