Building Permits Signal Recovering Housing Market

Building Permits tracks the change in government issued new building permits from the prior month. Housing starts tracks the change in the number of new residential buildings that began construction during the month. Both signal to the health of the US housing market. Larger-than-expected increases in housing starts and building permits suggest increased household income and in turn an economic expansion, and visa versa. According to the US Department of Housing and Urban Development, privately-owned housing units authorized by building permits in February were at a seasonally adjusted annual rate of 717,000, higher than the 686,000 estimate. This is 5.1 percent above the revised January rate of 682,000 and is 34.3 percent above the February 2011 estimate of 534,000. Privately-owned housing starts in February were at a seasonally adjusted annual rate of 698,000, lower than the 700,000 estimate. This is 1.1 percent below the revised January estimate of 706,000, but is 34.7 percent above the February 2011 rate of 518,000. Housing starts and building permits are a leading indicator for the health of the US housing market. An increase in housing starts and building permits implies a healthy housing market, and because of the multiplier effect, housing has an significant impact on the rest of the economy.