Housing Permits Continue Slower Growth

According to the Census Bureau, there were 95,000 housing permits filed in October 2014. This was an increase of 5.2% compared to one year ago. This was the fifth month in a row of month-over-month growth in housing permits. However, 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 January 2012. However, with recent surge in the month-over-month rate of growth it appears that the annual rate of change may 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 in the real rate has been negative for two months. 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.