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The Latest on Housing Permits

In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses the latest housing permits data.

  • Housing permits finally crossed the one million unit mark for the first time in over 5 years.  In October there were 1.03 million housing units authorized for new construction on an annualized basis.
  • Permits for multifamily unit construction rose strongly while single-family units have been moving mostly sideways since the beginning of the year.  Given rising rents it is understandable for the builders to add more apartments.  However, there is still a housing inventory shortage, particularly in the West region, but frustratingly no meaningful pick up in single-family permits there.
  • Permits are not actual construction – they are only a permission slip to build.  Housing starts data would show how much actual digging of the earth to bring new units to the market.  But this data is not available because of the lingering impact of the government shutdown.  Housing analysts are flying blind a bit about new construction activity.  The market needs 1.5 million units.  The last available housing starts info showed 883,000 units way back in August.   Never in modern U.S. economy have the housing starts been this low for 5 straight years.
  • For practitioners, what the data means is that the housing shortage will again be noticed come spring home buying season.  Home prices will continue to rise, not at the double-digit rate of appreciation of this year, but probably in the high single-digit rate in most of the country.
  • In New York City, rather than new construction the newly elected mayor has hinted at rent control on a broader number of apartments.  The mayor should keep in mind that there are two ways to destroy a great city: either through bombing or through rent control.  The first method is quick.  The latter takes a much longer time but the lack of incentive to properly spend on maintenance will steadily become visible over the years as good apartments turn into ugly buildings.

Lawrence Yun, Chief Economist

Lawrence Yun is Chief Economist and Senior Vice President of Research at NAR. He directs research activity for the association and regularly provides commentary on real estate market trends for its 1 million REALTOR® members.

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