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You can build a house on paper, but you don’t always make it brick


In other words, housing permits don’t always equal housing starts.

So, say you want to build a house… You’ll need to plan for financing and contractor schedules, among other things. But first and foremost, you must apply for and be granted a building permit before you can start to build. FRED has time series for both building permits granted and housing starts. Given that permits and actual construction go hand in hand, you might expect the two series to follow each other closely if not exactly, with possibly a small delay between the two.

As the graph shows, the two series are well connected during booms, when there’s an upswing in construction. But the two series aren’t nearly as well connected when building activity contracts. The lesson here is that a building permit doesn’t guarantee a house will be built. If economic conditions worsen, for example, between the time you apply for a permit and the time you plan to build, you might decide to postpone or even scrap an approved project. It’s during those times when the housing starts series falls faster than the permits series.

How this graph was created: Search for and add the “housing permits” series to the graph. Then open the “Edit Graph” panel to add a line: Search for and add the “housing starts” series. Finally, shorten the sample period to allow for more detail—in this case, starting 2000-01-01.

Suggested by Christian Zimmermann.

View on FRED, series used in this post: HOUST, PERMIT


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