Building Permit Data Suggests Bottom is Nearer
In looking at historical building permit data from 1960 to this year it is possible to see patterns that may predict future events. Back in February I did a post explaining the historical patterns of the nation’s building permit volumes and based upon what I saw I extrapolated that the building permits would have to fall below 800,000 before housing recovery might begin. Here is some of the text from that post just to give you a bit more background.
First, it may surprise some to know that in December of 2007 the number of building permits issued dipped below the number issued in January of 1960. But what is more interesting is that the numbers of building permits issued quarterly have only exceeded two million during just two periods since 1960. One period was from July 1971 through March of 1973 and the other was from March 2004 through March 2006.
If you look at the numbers of building permits issued after each of those periods you see a gradual, followed by steep decline. In April 1973 the number dipped below two million, rebounded a bit to top two million, and then dipped once again before finally going into a free-fall to bottom-out at 709,000. That whole process took 20 months before permits started climbing again.
Beginning in April 2006 permits dropped below two million, and with the exception of a couple of up-ticks inched downward until reaching a little over a million in January 2008.
The number of housing building permits issued in the 48 years from January 1960 to January 2008 has never dropped below 709,000, and whenever the numbers did hit rock bottom they did it in the 700s. In November of 1966 it was 736,000, in March of 1975 it was 709,000, in October of 1981 it was 731,000, and in January of 1991 it was 786,000.
Well, the numbers for August are now out and after spending the past six months mostly in the 900,000 to million range they have dropped to 854,000. This could be a signal that the market is finally diving to its bottom. Or, it could also mean the theory doesn’t hold water. Time will tell.
