There were 134,100 housing permits filed in December 2020, which was the highest total since July 2020. Permits filed in December increased a whopping 25% compared with one year ago. This was the fastest rate of growth since June 2015 and the second-fastest rate of growth since July 2013. Housing permits grew six of the last seven months and in five of those months, the growth was faster than 11.5%. In December, the annual rate of growth accelerated to 6.2%. December was the 17^th-straight month of growth and the ninth in the last 11 with growth faster than 5.0%.

The real 10-year Treasury rate, which is the nominal rate minus the rate of inflation, was -0.31%. This was the 12^th consecutive month and 15^th of the last 17 that the real rate was negative. However, the rate was grinding slowly higher since April.  December’s real rate was the highest since December 2019, which was the last time the real 10-year Treasury rate was positive.

In December, the year-over-year change in the real rate was -35 basis points. The change was negative for the 24^th month in a row. The change was at its highest level since December 2019. Since April, the trend in the year-over-year change in the real 10-year Treasury was less negative. A less negative change in the real rate is generally less stimulating to the economy.

The change in the 10-year Treasury rate is a good leading indicator of housing permits and construction spending. An increasing year-over-year change in the real 10-year Treasury rate typically leads to decreases in housing permits.