by Calculated Risk on 8/16/2007 08:33:00 AM

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

Privately-owned housing units authorized by building permits in July were at a seasonally adjusted annual rate of 1,373,000. This is 2.8 percent below the revised June rate of 1,413,000 and is 22.6 percent below the revised July 2006 estimate of 1,774,000.

Starts declined:

Privately-owned housing starts in July were at a seasonally adjusted annual rate of 1,381,000. This is 6.1 percent below the revised June estimate of 1,470,000 and is 20.9 percent below the revised July 2006 rate of 1,746,000.

And Completions declined slightly:

Privately-owned housing completions in July were at a seasonally adjusted annual rate of 1,512,000. This is 0.1 percent below the revised June estimate of 1,513,000 and is 22.2 percent below the revised July 2006 rate of 1,944,000.

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

As expected, Completions have followed Starts "off the cliff".

My forecast is for starts to fall to around the 1.1 million units per year level; a substantial decline from the current level. The decline in Starts for July appears to be the beginning of this next down leg for starts and completions.


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.

Why residential construction employment hasn't fallen further is a puzzle. See The Residential Construction Employment Puzzle for an overview of several explanations of why employment hasn't fallen.

Even with the declines in permits and starts, this report shows builders are still starting too many projects, and that residential construction employment is still too high.