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Housing Starts Miss As Permits Jump Ahead Of Building Code Changes

Tyler Durden's picture


More weak economic data today, as Housing starts were reported at 529K on expectations of 550K, another sequential decline from the prior revised 553K. The silver lining was in the housing permit number which was 635K on expectations of 554K (compared to a prior revised 544K). Yet as the note from GS below explains the only reason for the surge in permits is due to a jump in applications ahead of the implementation of new building codes in 2011. As Hatzius notes: "If building code changes are the main explanation for the rise in
permits, we should see a substantial drop back in multifamily permits
next month."

From GS:

1. Housing starts slipped 4.3% overall in December, with the drop entirely accounted for by higher-value single-family starts (which were down 9% on the month). Multifamily starts were up 18%, although they remain at exceptionally low levels.

2. Permits rose sharply, probably due to a rush by builders to apply for approval before new building codes came into force in 2011. Multifamily permits rose 53% on the month, while single-family permits were up 5.5%. If building code changes are the main explanation for the rise in permits, we should see a substantial drop back in multifamily permits next month.


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Wed, 01/19/2011 - 10:13 | Link to Comment 66Sexy
66Sexy's picture

More housing starts = Bearish. Less housing starts = Bullish.

More permits = Bearish.

Looks like more pressure is coming to the saturated housing market, to build more underwater slave caves.

Overall: Bearish.

Now real estate agents can market manipulate, by creating "contingent offers" on properties to get the bid's up. Be careful when dealing with this scum: if they will network to get appraisals up, they will network to get fake contingent offers on houses to create mania.

Wed, 01/19/2011 - 10:14 | Link to Comment SheepDog-One
SheepDog-One's picture

Well in our central planning world bankster run 'economy', a meteor the size of Rhode Island smashing into Manhattan would be 'bullish', and 'better than expected'.

Wed, 01/19/2011 - 10:29 | Link to Comment bunkermeatheadp...
bunkermeatheadprogeny's picture

That's too big of a meteor, it would affect the fly-over country. Something the size of a volkswagen bug would do the job just nicely.

Wed, 01/19/2011 - 15:34 | Link to Comment asteroids
asteroids's picture

Nope, too small, breaks up in the atmosphere. Goto This neat simulation looks like ground zero is Manhattan! Small hint: Pick a few defaults and set Distance to Impact to 1km and watch the fun.

Wed, 01/19/2011 - 10:40 | Link to Comment CPL
CPL's picture

I would say bearish as well, but I'm looking at the changes to the building code structure and I'm not impressed at all. less hardware to build more house.

Less hardware in an a frame and that fucker is going to fall down like a matchstick house if the earth starts rocking and rolling.

All they've done is create a profit incentive to build less house for the same amount of money. And that is fucking stupid. Although what do most home owners care as long as the appliances are all polished steel and marble counter tops.

Sad really how housing has turned into a big pile of shit.

Wed, 01/19/2011 - 13:46 | Link to Comment iDealMeat
iDealMeat's picture

People that think like you really should take some time to learn..

How about building with less fixed hardware so things flex when shook..

How about building bridges w/ rubber in the joints so they can expand and contract..


I guess people learn more from failure so perhaps you're on your way.

Wed, 01/19/2011 - 14:22 | Link to Comment CPL
CPL's picture


Why not just build bridges out of gum? Why...because it's fucking retarded that's why.

Go look at the construction specs again and then come back and we will discuss the math behind it. Shake rattle and roll, sure if you live in california, flexible housing would work. However, construction specs should meet saftey requirements for all home owners, not just a particular location. If concerned with flexibility in a housing project then 1700th century Japan teaches an engineer on how a structure should be built to sithstand a heavy earthquake (avoiding the idea of the ground opening under the structure)

1 foot of a snow distributed across the roof of a typical A-frame house would collapse with the occupants inside with the changes proposed. There is a reason you don't want a roof to "flex", wood is a wonderful building material but it's only around 20 pounds per square foot.

I'm not even talking about insulation and avoiding having a wind over 40 Kmph tear it off the house frame yet. Nor am i talking about the doors. I'm just talking about single element in physics and that is pressure ON the roof. The wood used in the house is really only "snapped" together by external forces (gravity, weight), that's the point of an A frame house, it "pushes" together. The hardware keeps it from slipping out of place and collapsing a roof on to the people inside the house.

The change to building code wasn't done to increase safety or the effectiveness of the structures being built. It was done to save the last developer standing with the bare minimum to meet 99.99% of saftey measures.

If we looked at it like an SLA, what they proposed was the builder is legally entitled to have 1 house out of 10,000 collapse and kill their owners. Versus 1 house in 100,000 home collapse and kill their owners. 99.99% or 99.999% Take your pick.

I'm an Engineer, not an Architect. As an Engineer I wouldn't underwrite or sign off on any building spec that was built with this as the building code. I say good luck to whoever crammed this through on finding an Engineer to approve the final anything on it until I see safety built into a design. If an Architect wants to approve it, that's fine, their faggotity career doesn't require culpability on saftey issues, mine does. A fag Architect just has to make it pretty.

The difference is I can be sued out of exsistence and my status removed as an engineer along with my diploma if what I build fucks up, kills someone and my name is on it.

Wed, 01/19/2011 - 15:46 | Link to Comment serotonindumptruck
serotonindumptruck's picture

It is unlikely that there is any liability on the part of the experts who draft and propose new rules for promulgation into law. Having said that, I'm not sure if the National Building Code (like the Fire Code) is even part of the Federal Register.

Underwriter Laboratories (most would recognize the logo) performs much of the testing and analysis for these regulations.

It seems apparent that expert opinions can be "purchased" without fear of legal or personal/career consequences. Just exactly what the graft is, I don't know, but it still results in an indirect tax upon society. It makes me wonder what legal authority the Building Code has to enforce compliance.

Wed, 01/19/2011 - 13:49 | Link to Comment iDealMeat
iDealMeat's picture

Dupe deleted..

Wed, 01/19/2011 - 10:09 | Link to Comment Sudden Debt
Sudden Debt's picture


I say they should include the house building sets that LEGO has sold to!





Wed, 01/19/2011 - 10:11 | Link to Comment SheepDog-One
SheepDog-One's picture

Homes built of LEGO's probably are a bit better than those by US Homes thrown up in 4 days.

Wed, 01/19/2011 - 10:10 | Link to Comment LawsofPhysics
LawsofPhysics's picture

 Actually, the advanced purchase of permits has nothing to do with codes.  I bought my permits (including sewage) in advance because the state will be significant increasing the cost of permits.  How else do you think local municipalities will raise capital to bring new customers online.  Duh!!!!

Wed, 01/19/2011 - 10:14 | Link to Comment youngman
youngman's picture

Sometimes cites have sales on raise cash...but I agree ..regulations are going up up and up....but if you are buying a are an optimist at heart....the only hope for new construction right now is that the lawyers shut down the forclosure process and cuts off all demand.....a new house would have clear it could be sold...and the title insured...the only hope....other than a natural disaster....there is plenty of homes on the market for the demand out there...

Wed, 01/19/2011 - 10:25 | Link to Comment SheepDog-One
SheepDog-One's picture

529,000 housing starts? I call straight-up lie I dont care what anyone says that is total horse shit...SHOW me in January these planned pads for new houses? There are none, I know I work in one of the biggest homebuilding areas around and the only ones being built are customs and those are few! 529,000 new homes yea they must think we're all retarded, well I'm not.

Wed, 01/19/2011 - 10:41 | Link to Comment Sudden Debt
Sudden Debt's picture

Do barracks in the FEMA camps also counts as a new build house?

Wed, 01/19/2011 - 11:17 | Link to Comment SheepDog-One
SheepDog-One's picture

Hmmm yes....interesting....

Wed, 01/19/2011 - 10:31 | Link to Comment's picture

would love to know the  um-hmm non-seasonally adjusted starts.

Wed, 01/19/2011 - 14:59 | Link to Comment CPL
CPL's picture

You mean who would insane enough to dig in the dead of winter for retail housing?  That would be an interesting number.  ;)

Wed, 01/19/2011 - 10:33 | Link to Comment Oh regional Indian
Oh regional Indian's picture

Housing starts in this market, be good to know if they are for large homes or tiny ones?
I predict a huge boom in Gated Apartment building in the US as more and more people seek shelter in low cost, shared amenity, low maintenance living.
It's like that here in India, but for different reasons entirely. Here, land records wrt to ownership are in such disarray that your best bet is to leave it to the Apartment builder and just buy yourself an overpriced Cage in the sky.

In bangalore, in a decent(not posh) area, a 2000 sq. ft. apartment can go for close to $300-350,000 dollars. And you can smell the open drainage from your cage in the sky after spending 30% of your income on installments.


Wed, 01/19/2011 - 10:53 | Link to Comment Panafrican Funk...
Panafrican Funktron Robot's picture

Just ran a chart for annual housing completions, for 2010 we came in at 653,500 housing completions.  This is the worst ever annual completions print, going back to 1968 when they started collecting the data.  Repeat, worst ever.  Last year we were at 794,400, for an annual drop of 18%.  That's right folks, the home construction market is 18% worse than last year.  We are now 67% off the 2006 peak of 1,979,400.

Wed, 01/19/2011 - 13:46 | Link to Comment faustian bargain
faustian bargain's picture

That's frickin' dismal. Everyone should see that chart.

Wed, 01/19/2011 - 13:55 | Link to Comment faustian bargain
faustian bargain's picture

... (Guru Meditation)

Wed, 01/19/2011 - 10:55 | Link to Comment Caviar Emptor
Caviar Emptor's picture

One more notch in the Biflation belt: housing continues its tailspin into an inflationary picture.

Bottom line: cost of home ownership?? UP! 

Value of underlying asset?? DOWN!


Wed, 01/19/2011 - 11:16 | Link to Comment sunnyside
sunnyside's picture

One of the big changes in the newest code cycle that is causing this surge was the requirement for sprinklers in townhomes (as opposed to just firewalls) and also in national code (some jurisdictions are opting out) of sprinklers in all new single family homes.  For the states that didn't opt out of it (some are, some aren't), then this just added $5-10K to the cost of a home.  That might be fine with a $700K home, but it will help crush the $100-150K new market.

The politics and jockeying the past couple of years between the sprinkler lobby, home builders associations and building officials has been a circus to watch.  Between the sprinkler mfg's feining interest in little Jonny buring up (it's certainly not about the money to them..) and the home builders screaming instant bankruptcy because of the added costs, everyone is dirty.


PS, as a side note, when the final vote was to take place to include mandatory sprinklers in the ICC model code, the main sprinkler lobby openly offered to fly any voting member into Minneapolis for the vote and pay their hotel as well.

Wed, 01/19/2011 - 11:09 | Link to Comment Bold Eagle
Bold Eagle's picture

New single family units sold: 2009 - 375k, 2010 - 290k. Who is going to buy those houses? I have a really hard time beleiving that the builders are going to build 417k this year.

Wed, 01/19/2011 - 17:17 | Link to Comment Boxed Merlot
Boxed Merlot's picture

This is from Seeking Alpha on Monday, Jan.10:


Banks repossessed more than 1M homes in 2010, according to a RealtyTrac report, the highest annual figure since 2005. A total of 2.9M homes received foreclosure filings last year, the equivalent of one in every 45 U.S. households. However, the ugliest figures are likely to belong to 2011, when foreclosures and repossessions are expected to peak.


One in 45.  That's just last year.  I have a hard time letting that sink in.  Incredible.

Wed, 01/19/2011 - 11:34 | Link to Comment wisefool
wisefool's picture

Regardless of who they are building these new homes for, I'd like to know where they are building them. If they are apartments,condos, or free standing. On existing lots or new ones. I guess an average lot size of 0.1 acres x 500,000 per month and you got 50,000 acres/month being taken from somewhere.  Not to mention the affects to watersheds. My math may be way off.

Wed, 01/19/2011 - 12:09 | Link to Comment MachoMan
MachoMan's picture

There isn't any value in building a home unless you're going to spend some decent scratch...  why not wait for weak hands to dump a decent home and pick it up, albeit with a few things not ideal?  Essentially, building a home is only for those people who are perfectionists and/or have the money to build something exactly as they see fit...  it's just a really small percentage of the market.

Wed, 01/19/2011 - 12:14 | Link to Comment johngaltfla
johngaltfla's picture

There were only 300 permits more issued in December 2010 than in December 2010 and the increase was in multifamily, not single family homes. I wouldn't get excited. This is just more validation of the real estate depression.

Wed, 01/19/2011 - 12:34 | Link to Comment Boxed Merlot
Boxed Merlot's picture

A "cage in the sky" in Bangalore for $150 sq ft where you "can smell the open drainage"...


I still contend I live in Paradise. The central CA valley has seen property values plummet 65-75% from the high water mark and are currently around $80. per foot. 60 miles to the west values climb to 200-350 per sf.


Currently, in the middle of winter, we're struggling thru a hideous cold snap of 61 degree highs. And while it's true, you couldn't pay me to stay in my SFR if it didn't have free flowing Gas, Electricity, Treated Water and Operative Sewer system, I also enjoy weekly garbage pick-up, ("green waste", "recyclables" and traditional).


I don't get to burn my leaves out front anymore but I occasionally sneak them into my chimnia out back at night to relive my childhood memories. Beats the heck out of the open sewage endured by others.


But, true to form, I Want More!!!

Wed, 01/19/2011 - 16:36 | Link to Comment ColonelCooper
ColonelCooper's picture

Sounds like paradise.  Tell us what else they don't let you do.

Wed, 01/19/2011 - 19:09 | Link to Comment SmittyinLA
SmittyinLA's picture

What building code changes from whom?

Have the feds finally taken over local building codes?

Are the looking to extend the affordable housing policies of CA to TX and the South? (sarcasm)

Wed, 01/19/2011 - 19:09 | Link to Comment SmittyinLA
SmittyinLA's picture

What building code changes from whom?

Have the feds finally taken over local building codes?

Are the looking to extend the affordable housing policies of CA to TX and the South? (sarcasm)

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