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By New_Deal_democrat November 27, 2013 7:00 am
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October housing permits the best US economic news in over half a year

Yesterday's report that October housing permits cam in at 1.034 million on an annualized basis, the highest in over 5 years, as shown in the graph below:

 
 is simply the best economic news on over half a year.
 
I have said in the past that, if there were only one piece of economic data I could have, it would be housing permits.  They are a long leading indicator of the real economy, turning well over a year before the economy as a whole does, as shown in this graph of permits going back over half a century:
 
 
 
That's because, once a permit is issued, the house gets built, the landscaping is put in place, furniture and appliances are bought, and other improvements are made by the new homeowners.  The entire process can play out several years, so that is a long tail of economic activity.  An increase in permits means an increase in all of that activity subsequently, so that permits have increased to a new post-recession record is very welcome news.
 
As the graph above shows, housing permits have fallen by at least 200,000 on an annualized basis to signal the likelihood of a subsequent recession.  Although it doesn't show well in the above graph, even the 2001 just-barely-a-recession was preceded by a decline from 1.742 million annualized in September 1998 to 1.542 in July 2000, an exact 200,000 decline.
 
Another way of showing similar information is to show housing permits on a YoY basis.  That's what this subsequent graph does.  A YoY decline of 200,000 permits is indicated by the red line:
 
 
Housing permits had been trending sideways since September of last year (as best shown on the first graph above), and indeed the September over September comparison was only +53,000.  Since interest rates have backed up over 1% since April, a further decline in housing permits looked likely.   That instead, we got a new post-recession record high - if the increase holds up for a few more months - bodes very well for the economy in 2014.  So this was simply the best economic news since the back-up in interest rates began in April.
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