Housing Permits Grow 19% in October 2013
According to the Census Bureau, there were 89,900 housing permits filed in October 2013. Housing permits grew at a rate of 19.4% compared to last October. This is the second month in a row that housing permits have grown at a faster rate. However, the annual rate of change continues to grow at a slower rate. It fell to 22.9% in October, which is the sixth straight month of decelerating growth. Housing permits are significantly up from the bottom in 2009 through 2011, but they are struggling to climb our of previous housing recession territory.
In the current environment of zero interest rates from the Federal Reserve, the real Fed funds rate is a good leading indicator of housing permits. The real Fed funds rate has been trending down year over year since April 2013. A continued decline in the year over year change in real interest rates would be positive for the housing market. Also, the Federal Reserve has actually increased the amount of money it is creating the last three months despite talk of tapering. This has coincided with the faster month-over-month growth in housing permits.
We use housing permits as an early leading indicator for the following industries: appliances; custom processors; furniture; hardware; HVAC; off-road and construction machinery; petrochemical processors; plastics and rubber; pumps, valves and plumbing products; textiles, cloting and leather goods; and wood and paper products. In general, housing permits are a very good leading indicator for the production of plastic product.
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