Housing Permits Improving Compared to Last Year
According to the Census Bureau, there were 89,600 housing permits filed in September 2014. This was an increase of 10.2% compared to one year ago. This was the thrid time in the last four months that the month-over-month rate of change has been above 10%. The annual rate of growth continued to decelerate, as it has done since April 2013. Housing permits are growing at their slowest annual rate since February 2012. However, with recent surge in the month-over-month rate of growth it appears that the annual rate of change will bottom out very soon.
The real 10-year treasury rate is a good leading indicator of housing permits. The year-over-year change in the real 10-year treasury rate has been trending down since July 2013. In fact, the change moved into negative territory for the first time since September 2012. Since changes in the interest rate lead changes in housing permits and construction spending by about 12 months on average, we should expect to see the rate of growth in housing permits to bottom our soon (everything else being equal of course).
We use housing permits as an early leading indicator for the following industries: appliances; custom processors; furniture; hardware; HVAC; off-road/construction machinery; petrochemical processors; plastics; plastic/rubber products; pumps/valves/plumbing products; textiles/clothing/leather goods; and wood/paper products.
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