Housing Construction Transitions Towards Possible Growth

Permits were at their highest level since June 2018 while the one-month rate of contraction was the slowest in the last four months.

There were 118,700 housing permits filed in April 2019. This was the most permits filed since June 2018 and the second consecutive month with more than 105,000 permits filed. While permits still contracted 1% month-over-month, the rate of contraction was the slowest in the last four months. With four-straight months of month-over-month contraction, the annual rate of change decelerated to 0.0% in April, making it the first month that housing permits failed to grow on an annual basis since September 2011.

However, the 10-year Treasury rate is indicating that the subtle signs of improvement in housing permits could continue in the months ahead. In April, the year-over-year change in the 10-year Treasury rate was -0.53%, which was sixth consecutive month the change declined and the fourth-straight month the change was below zero. April’s change in the rate was the lowest since January 2018. 

The change in the 10-year Treasury rate is a good leading indicator of housing permits and construction spending. A decreasing year-over-year change in the real 10-year Treasury rate should lead to increases in these data points down the line.

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