Housing Permits Increase 7.8% in November 2013

According to the Census Bureau, there were 71,700 housing permits filed in November 2013. This was the fewest housing permits filed since February 2013. Housing permits grew at a rate of 7.8% compared to last November. This is the slowest rate of month-over-month growth since December 2011. Also, it is the second time in four months that the month-over-month rate of growth was below 10%. 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. However, unless inflation picks up, it will be difficult for the year over year change in the real Fed funds rate to move much lower after the first quarter of 2014. 

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.