Treasury Rate Indicates Positive Future for Housing Permits

This was the longest period of contraction since early 2011, but the 10-year Treasury rate is moving in a positive direction for housing permit growth.

There were 124,000 housing permits filed in May 2019. This was the most permits filed since May 2018 and the third consecutive month with more than 105,000 permits filed. However, permits still contracted 0.8% month-over-month, which makes five-straight months of month-over-month contraction. As a result, the annual rate of change moved into an accelerating contraction mode for the first time since March 2011.

That said, the 10-year Treasury rate is indicating that the direction of housing permits may turn around in 2019. In May, the year-over-year change in the real 10-year Treasury rate was -0.61%, which was the seventh consecutive month the change declined and the fifth-straight month the change was below zero. May’s change in the rate was the lowest since December 2017.

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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