Building Permits Slide

Building permits slid sharply in July but reflect in part a plunge in the Northeast where a change in New York City real estate law pulled permits into June at the expense of July. Permits fell 16 percent in July to a 1.119 million annual rate with the Northeast down 60 percent. But permits also fell in the other three regions including a steep 9.9 percent decline in the West. Turning now to starts, they inched 0.2 percent higher to a 1.206 million rate. But the decline in permits, though skewed by the Northeast, points to less strength than expected for the new home market in the months ahead.

A relative positive in the report is less weakness in permits for single-family homes which fell only 1.9 percent. Permits for multi-family homes, which are smaller in size and provide less of a boost to GDP, fell 32 percent. Housing completions came in at a 987,000 pace in the month, up 2.4 percent from June in a positive start for the third quarter.

In sum, this report is on the soft side and doesn't increase the chances for a September rate hike from the Fed. Initial reaction in the markets is mixed with the resilience in starts offering some offset to the plunge in permits.

Recent History Of This Indicator:
Strength for rental units has been driving housing starts & permits sharply higher this year with strength for single-family homes much less pronounced. Forecasters see another rise for starts, up 0.5 percent to a 1.180 million annual rate, but a very sharp 8.4 percent reversal to 1.230 million for permits where the year-on-year rate was up 30 percent in June.