About 20 new single family homes have been permitted in the city for August and September, less than a third of the pre-recession levels. After briefly flirting with single digits, multifamily permits stayed at about 150 units in September.
A permitted unit does not necessarily get built, however. Housing starts, which is a measure of homes that actually begin construction, and completions are better gauges of building activity. While these figures are not available for the city (only permits are published at the city level), activity for the Midwest region and the U.S. as a whole has shown no sign of improving.
Both housing starts and completions went into a free fall starting in late 2006 and have remained at a steady low level since early 2009.
As I’ve mentioned before, this is both good and bad news. The good: the housing market simply does not need any more supply. Not only are home builders sitting on large inventories of unsold homes; and not only is there a large inventory of REO homes; and not only is there a shadow inventory of potentially millions more homes ready to enter foreclosure; but you also have a large number of people who bought starter homes looking to move up–a natural pent-up demand for moving, once the economy improves.
The bad news, however, is that residential construction often leads the U.S. out of recessions. I will post more on this later in the week, but additional housing investment almost always precedes economic growth and a recovery from recessions. Neither of the two graphs in this post provide any optimism on that front.
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