Housing Permit Growth Second Slowest Since December 2011

According to the Census Bureau, there were 96,500 housing permits filed in April 2014. This was an increase of 6.6% compared to one year ago, which is the second slowest rate of month-over-month growth since December 2011. The annual rate of change continued its trend of decelerating growth, falling to 13.0%. This is the slowest rate of annual growth since March 2012.

The real Fed funds rate is a good leading indicator of housing permits. The year-over-year change in the real Fed funds rate has been trending down since April 2013. A continued decline in the year over year change in real interest rates would be positive for the housing market. If the nominal rate and the inflation rate stay where they were in April, then the year-over-year change in the real Fed funds rate will continue to fall through the end of the year. This likely will provide a temporary boost to housing permits. However, if the nominal rate rises (the Fed has hinted that this will happen in the next on to two years) or the rate of inflation falls back down, then the year-over-year change change in the real Fed funds rate will go lower for only another couple of months.

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; plastics and rubber; pumps, valves and plumbing products; textiles, cloting and leather goods; and wood and paper products.