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Thursday, May 17, 2007

On Housing Permits and Starts

by Calculated Risk on 5/17/2007 01:10:00 PM

For those that enjoy statistics, Professor Menzie Chinn writes: Follow up on Housing Permits and Housing Starts: Do Permits "Predict"

In general I've ignored permits, and focused on starts and completions for housing. Professor Chinn argues there is some predictive value for permits:

Update: NOTE, the following graph is from Professor Chinn (see link). It is a log scale, and the gray area is future (not recession).

Housing Permits and Starts"These results lead me to the conclusion that -- while permits might not be incredibly informative on their own for future housing starts -- they are useful when taken in conjunction with the gap between log levels of housing starts and permits, as well as lags of first differenced log housing starts and permits.
The model predicts continued decline in housing starts of 5.1% (in log terms), calculated as changes in predicted values (as opposed to using the actually observed value for 2007M04). Of course, with a standard error of regression (SER) of 0.055, a zero change lies within the 67% prediction interval."