The U.S. Census Bureau released local area housing permit data yesterday for the month of February (data by state, metropolitan statistical area and county is available HERE). Housing permits are closely related with housing starts (new construction), and are generally considered a leading economic indicator. At the national level, The Conference Board includes building permits in their leading indicator series. At the state level in Oregon, both our office’s Oregon Index of Leading Indicators and the University of Oregon Index of Economic Indicators incorporate building permits into their respective series.
The graph below illustrates Oregon’s housing permits for both single family homes and multi-family buildings since 1990. It is interesting to notice the stability in single family permits issued during the 1992 – 2002 time period prior to the housing bubble and subsequent crash. Overall, single family housing permits have been increasing steadily since February 2009 but still remain over 50 percent below their relatively stable 1992 – 2002 levels.
One way to gauge the relative health of Oregon’s new construction housing market is to compare newly issued permits with neighboring states and the U.S. overall. The graph below shows single family permits as an index to their calendar year 2000 levels.
As mentioned previously, housing permits issued are closely related to housing starts or new construction. In our forecast, the level of housing permits are a direct input into our Oregon Economic Model. Our office’s most recent housing starts forecast for Oregon is shown below, along with IHS Global Insight’s national housing starts forecast. These series are indexed to their long-run historical average prior to the collapse of the bubble (1973 – 2007). For the U.S. that average is more than 1.5 million annually and for Oregon it is slightly more than 21,000. Moving forward, our perspective is for a prolonged and sluggish return to growth in new construction. We do not believe there will be a strong rebound, or return to historical average, in the near future as the existing inventory (including shadow inventory) and market fundamentals do not warrant such a sharp increase.