by Calculated Risk on 6/19/2007 09:13:00 AM

The Census Bureau reports on housing Permits, Starts and Completions. Seasonally adjusted permits increased:

Privately-owned housing units authorized by building permits in May were at a seasonally adjusted annual rate of 1,501,000. This is 3.0 percent above the revised April rate of 1,457,000, but is 21.7 percent below the revised May 2006 estimate of 1,918,000.

Starts declined:

Privately-owned housing starts in May were at a seasonally adjusted annual rate of 1,474,000. This is 2.1 percent below the revised April estimate of 1,506,000 and is 24.2 percent below the revised May 2006 rate of 1,944,000.

And Completions declined slightly:

Privately-owned housing completions in May were at a seasonally adjusted annual rate of 1,534,000. This is 0.5 percent below the revised April estimate of 1,542,000 and is 19.3 percent below the revised May 2006 rate of 1,901,000.

Click on graph for larger image.
The first graph shows Starts vs. Completions.

As expected, Completions have followed Starts "off the cliff". Completions are now at the level of starts. Starts will probably fall further, based on housing fundamentals of excess supply and falling demand, and completions will most likely again follow the next decline in starts.



This graph shows starts, completions and residential construction employment. (starts are shifted 6 months into the future). Completions and residential construction employment were highly correlated, and Completions used to lag Starts by about 6 months.

Both of these relationships have broken down somewhat (although completions have fallen to the level of starts). Why residential construction employment hasn't fallen further is a puzzle. Also the time between start and completion has increased recently.

This report shows builders are still starting too many projects, and that residential construction employment is still too high.