• 5 hours S&P 500 Officially In An Earnings Recession
  • 9 hours Miners Are Weathering The Trade War Storm
  • 12 hours UK Credit Card Interest Rates Are Skyrocketing
  • 1 day From Frenzy To Flop, The Death Of This Year’s Most Hyped IPO
  • 1 day Are Smart TVs Spying On Us?
  • 1 day Is Fossil Fuel Divestment A Waste Of Time?
  • 2 days A Russian Billionaire’s Space Quest To Save Humanity
  • 2 days Markets Take Breather As Consolidation Continues
  • 2 days Economic Woes Weigh On Copper Prices
  • 3 days World's Largest IPO At Risk Following Drone Strikes
  • 3 days Gold Is Beating Buffett’s Berkshire Hathaway
  • 3 days What’s Behind The Silver Sell-Off?
  • 3 days The Retail Apocalypse Is Accelerating
  • 4 days The Top Tech Stocks Of The Year
  • 4 days America’s Workforce Elderly Workforce To Double By 2028
  • 4 days Toyota Tests Solar-Powered Prius
  • 5 days Why The Gold Rally Flatlined
  • 5 days The Uranium Sector Can’t Catch A Break
  • 6 days Upcoming Fed Meeting Has Investors On Edge
  • 6 days Global Gold Sector Outlines Responsible Mining Principles
Billionaires Are Pushing Art To New Limits

Billionaires Are Pushing Art To New Limits

Welcome to Art Basel: The…

The Problem With Modern Monetary Theory

The Problem With Modern Monetary Theory

Modern monetary theory has been…

Zombie Foreclosures On The Rise In The U.S.

Zombie Foreclosures On The Rise In The U.S.

During the quarter there were…

  1. Home
  2. Markets
  3. Other

Housing Permits a Leading Indicator? Of What?

Blame the Weaher

Econoday made this claim: "Starts can be affected by weather which along with related adjustments are always factors for this reading in the winter months."

It's amusing how economists never seem to know what the weather "was" until economic reports come out a month later.

"Very Solid Report"

What really caught my eye was Econoday's opening gambit.

"A surprising but perhaps one-time drop in single-family starts masks what is otherwise a very solid housing starts and permits report for December. ... But the backlog behind future starts continues to build as permits came in very strong, virtually steady at a 1.302 million rate and showing a noticeable 1.8 percent gain for single-family permits to 881,000."

Leading Indicators

The Consumer Conference Board's list of Leading Indicators" rel="noopener noreferrer">Leading Indicators contains housing permits, the S&P 500, the yield curve, IMS, weekly earnings, M2, and the University of Michigan's Consumer sentiment report.

Permits a "Backlog of Future Starts"

Let's investigate the claim in pictures.

Starts vs Permits

https://s3-us-west-2.amazonaws.com/maven-user-photos/mishtalk/economics/zmfATcSa4EegwR7v_znq6Q/1C4aneqiQ0S_ryAB4kOkrg

 

Starts vs. Permits Synopsis

  • Permits are not a leading indicator of starts.
  • If there are sales, homebuilders will start homes.
  • If there are not sales, homebuilders will not start construction no matter how many permits they have.

Starts vs. Permits - Percent Change from Year Ago

https://s3-us-west-2.amazonaws.com/maven-user-photos/mishtalk/economics/zmfATcSa4EegwR7v_znq6Q/my0vjlDOKkG9EIo3yHxJaQ

Although permits are required to do a start, permits do not represent a "backlog behind future starts".

In fact, year-over-year spikes in permits tend to be a lagging indicator.

By Mike Shedlock

Back to homepage

Leave a comment

Leave a comment