Friday, November 17, 2006

Housing: Starts and Completions

by Bill McBride on 11/17/2006 10:05:00 AM

The Census Bureau reports on housing Permits, Starts and Completions. Permits are falling:

Privately-owned housing units authorized by building permits in October were at a seasonally adjusted annual rate of 1,535,000. This is 6.3 percent below the revised September rate of 1,638,000 and is 28.0 percent below the October 2005 estimate of 2,131,000.
Starts are falling:
Privately-owned housing starts in October were at a seasonally adjusted annual rate of 1,486,000. This is 14.6 percent below the revised September estimate of 1,740,000 and is 27.4 percent below the October 2005 rate of 2,046,000.
And Completions are still just below record levels:
Privately-owned housing completions in October were at a seasonally adjusted annual rate of 1,953,000. This is 3.8 percent below the revised September estimate of 2,031,000 and is 0.7 percent below the October 2005 rate of 1,967,000.
Click on graph for larger image.
The first graph shows Starts vs. Completions.

Starts have fallen "off a cliff", but completions have just started to fall.


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

Based on historical correlations, it is reasonable to expect Completions and residential construction employment to follow Starts "off the cliff". This would indicate the loss of 400K to 600K residential construction employment jobs over the next 6 months.