Housing Permits Reach Highest Level Since June 2008

According to the Census Bureau, there were 90,500 housing permits filed in April 2013. This is the highest number of housing permits filed June 2008. Housing permits grew at a rate of 44.8% compared to last April. The is the fastest rate of month-over-month growth since October 2012 and the second fastest rate of month-over-month growth since September 1983. The annual rate of change began growing faster in April. In the last year, housing permits have jumped up noticeably from where they were in 2009-2011. However, the level of housing permits is just starting to move out of 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. While the real Fed funds rate is still negative, which encourages borrowing, the year-over-year change in the rate has increased for seven consecutive months. However, the trend in the year-over-year change in the real Fed funds rate should turn around soon, which would be a positive for future 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.