Blame the Weaher

Earlier today I reported, ​Housing Starts Unexpected Dive 8.2%: Economists Blame the Weather.

Econoday made this claim: "Starts can be affected by weather which along with related adjustments are always factors for this reading in the winter months."

It's amusing how economists never seem to know what the weather "was" until economic reports come out a month later.

"Very Solid Report"

What really caught my eye was Econoday's opening gambit.

"A surprising but perhaps one-time drop in single-family starts masks what is otherwise a very solid housing starts and permits report for December. ... But the backlog behind future starts continues to build as permits came in very strong, virtually steady at a 1.302 million rate and showing a noticeable 1.8 percent gain for single-family permits to 881,000."

Leading Indicators

The Consumer Conference Board's list of Leading Indicators contains housing permits, the S&P 500, the yield curve, IMS, weekly earnings, M2, and the University of Michigan's Consumer sentiment report.

Permits a "Backlog of Future Starts"

Let's investigate the claim in pictures.

Starts vs Permits

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Starts vs. Permits Synopsis

  • Permits are not a leading indicator of starts.
  • If there are sales, homebuilders will start homes.
  • If there are not sales, homebuilders will not start construction no matter how many permits they have.

Starts vs. Permits - Percent Change from Year Ago

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​Although permits are required to do a start, permits do not represent a "backlog behind future starts".

In fact, year-over-year spikes in permits tend to be a lagging indicator.

Mike "Mish" Shedlock

ISM a Leading Indicator? Of What?

Here's an interesting chart from a tweet today. I cannot make heads or tails out of the proposed idea.

Housing Starts Jump 5% in May, Permits Dip 4.6%: 2nd-Quarter GDP Looking Solid

Housing starts rose a solid 5% in May with permits down 4.6%. Starts are more important so this was a good report.

Housing Starts and Permits Dive Again, Mainstream Media Blames Hurricanes: What's the Real Story?

Housing starts and permits disappoint again. Both sets of numbers were well under the consensus estimates. Mainstream media was quick to blame the hurricanes, but starts were also down in the Midwest and Notheast. Let's take a look at the numbers and the real story.

Millennials Lead the Way in Housing Trends

Millennials have had a big change this decade on home ownership rates. Let's investigate why, in pictures.

Housing Starts Jump 9.2%, Permits Decline 5.7%

Housing starts are up but permits are down. The current overall level of activity is less than occurred in 1962.

Housing Starts and Permits Well Below Most Pessimistic Estimates

Economists expected a small pullback in housing starts and permits. Instead, those aspects of the report were a disaster

Housing Starts Unexpectedly Plunge 12.3% in June, Permits Down 2.2%

Economists were shocked by today's housing report. Let's go over the details.

Joke of the Day: Leading Economic Indicators Rise

The Conference Board says leading economic indicators for the US are still increasing.

Housing Starts Jump 12.3%, Permits 7.7%, Completions, 2.4%

Likely spurred on by falling interest rates, housing stats and permits jumped in August.