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By New_Deal_democrat August 19, 2014 1:33 pm
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It looks like the housing slowdown is abating

The drift lower in interest rates this year looks like it is feeding through into new housing.   In general, in the past, a 1% change in interest rates has led to an approximate 100,000 change, annualized, in housing permits.  The rise in interest rates of over 1% at midyear 2013 fed through into a complete halt in growth in new home construction.  Now the fade lower of 0.6% in interest rates since the beginning of 2014, leading to YoY interest rates being lower, is showing up in a little bit of a revival.

 
To begin with, here are interest rates (inverted, blue, left scale) compared with housing permits (red, right scale):
 
 
Now here is the same data on a YoY% basis:
 
 
The YoY decline in interest rates should show up as a YoY improvements in housing permits, and it appears that's what happened in July.
 
A second theme I have written about in the last few months is how the large Millennial generation is having a similar effect now as the Baby Boom did almost half a century ago.  The surge in the number of young adults is adding demand to the market, and in particular to multi unit dwellings such as apartment construction. You can see that as rates rose in 2013, both single family dwellings (blue, left scale) and apartments (red, right scale) came under pressure, but apartments fared better:
 
 
While the absolute number of the increase in multiunit dwellings authorized is small, measured as a YoY% change, you can see that apartments held up better during the recent slowdown, and have rebounded more:
 
 
Because interest rates remain higher than they were prior to May 2013, I'm not expecting a huge rebound, but it does look like the slowdown has bottomed out, and comparisons should improve through the rest of this year at least, as declining interest rates continue to feed through.
 
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