Notice of Methodology Change: With the release of the new residential construction data for January on 19 February 2025, the survey of building permits will make modifications to the methodology for the conclusion. The current process calculates deduction factors by region and the new process will calculate factors in a mix of departments and large individual states. For more details on this change, see our deduction section on our methodology page.
November 19, 2024 – The U.S. Census Bureau and the U.S. Department of Housing and Urban Development jointly announced
announces the following new US building permit statistics for October 2024:
Privately owned housing units authorized under building permits in October were at a seasonally adjusted annual rate of 1,416,000. This is 0.6 percent lower than September’s revised rate of 1,425,000 and 7.7 percent lower than the October 2023 rate of 1,534,000. The average rate of individual family housing construction permits in October was 968,000; this is 0.5 percent higher than September’s revised figure of 963,000. The average unit license rate in buildings with five or more units was 393,000 in October.
The start rate of construction of privately owned housing in October was a seasonally adjusted annual rate of 1,311,000. This is 3.1 per cent lower (±11.6%)* of the revised estimate for September of 1,353,000 and 4.0% (±9.0%) lower* than the October 2023 rate of 1,365,000. The October start rate for single family housing was 970,000; this is 6.9 per cent (±11.7 per cent)* lower than September’s revised figure of 1,042,000. The October average for units in buildings with five or more units was 326,000 units.
Building permits are key indicators of economic health, reflecting the number of new residential and commercial construction projects expected to commence in the near future.
Market Reaction to US Building Permit Data: Positive and Negative
The immediate market reaction to the building permit data was mixed. In the hours following the release of the report, stocks in the construction and real estate sectors were volatile. Shares of homebuilders, which had been on an upward trajectory in previous months, showed signs of decline as investors reacted to the news.
Positive repercussions
- Continued demand: Despite a slight drop in permits, the overall level of 1.42 million remains historically high, suggesting that demand for housing still exists. Builders are likely to benefit from current demand, especially in regions with strong job growth and economic stability.
- Construction Recruitment: The fixed number of building permits supports employment in the construction sector. As long as permits remain above the million mark, this suggests that construction jobs will continue to emerge, boosting the economy.
- Long-term growth: Economists stress that the overall trend in building permits has been positive over the past few years, driven by a recovering economy and low unemployment rates. A strong housing market could lead to increased consumer spending, benefiting the wider economy.
Negative fears
- Interest rate effects: The decline in building permits can be attributed in part to higher interest rates, which have made borrowing more expensive for both builders and home buyers. This trend could discourage enthusiasm for new construction, leading to further declines in future permits.
- Economic uncertainty: The current economic climate, characterized by inflationary pressures and potential recession fears, may prompt developers to adopt a more cautious approach. If uncertainty persists, it could lead to a more pronounced slowdown in construction activity.
- Market sentiment: Sentiment in the housing market can change quickly. Lower permits could lead to a wider loss of trust among consumers, affecting their willingness to make large purchases, such as homes.
Cautious optimistic outlook for US building permits in November and December 2024
Looking ahead, the outlook for building permits in December is cautiously optimistic. Analysts expect permits to rise slightly, with expectations pointing to a figure of around 1.45 million.
The slight decline in building permits for November 2024, which came in below market expectations, sparked a range of responses from market analysts, developers and policymakers. The data points to ongoing pressures in the housing market, including high mortgage rates, affordability challenges, and a general sense of caution among developers. While the November figures are not an immediate concern, they highlight the fragility of the construction sector against a complex economic backdrop.
As the market enters December 2024, the outlook remains cautious, and building permits are likely to remain in the same range as in November. However, the longer-term outlook for the housing market remains promising, as underlying demand for new housing continues to support the need for construction, despite short-term obstacles. Market participants, especially those in the real estate and financial sectors, will be watching these trends closely as they reflect on their strategies for the coming months, looking for signs of stabilization or a potential shift in the broader economic environment.
The fact that building permits are not rising as expected could prompt the Fed to reassess its current stance on interest rates. If the housing sector continues to show signs of weakness, the Fed may decide to either halt its cycle of monetary tightening or even shift toward lowering interest rates in an effort to stimulate economic activity and boost consumer confidence.
Investors, especially those in the bond and equity markets, are likely to keep a close eye on these developments, as changes in the direction of Fed policy could have far-reaching implications for asset prices and overall market sentiment.
