Long-Term outlook for Housing Surpasses Short Term

Housing permits contracted for the third month in a row in March, but changes in the 10-year Treasury rate are a positive indicator down the line.

There were 105,700 housing permits filed in March 2019. This was the first month with more than a 100,000 permits filed since November 2018. However, permits contracted 10.1% compared with one year ago, contracting for the third consecutive month. This was the fastest rate of contraction in the one-month rate of change since June 2016. As a result, the annual rate of growth decelerated for the third-straight month, falling to 1.5%.

In March, the year-over-year change in the 10-year Treasury rate was -52 basis points, which was fifth consecutive month the change declined and the third-straight month the change was below zero. March’s change in the rate was the lowest since January 2018. This trend is a positive leading indicator for housing permits, and capital equipment spending.

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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