New housing is recovering, but varies greatly by state.
By Manuel Gutierrez, NKBA Consulting Economist
New housing construction has surged since the pandemic lows, with total starts reaching an annualized rate of 1.4 million units in August — 51% higher than April levels. Housing permits have also registered strong gains, although not quite at the levels seen for new construction; they’re up by 38% over April. This report delves into details of housing permits, which is the precursor of new construction.
Looking at the data on a state-by-state basis, it’s not surprising that given the different economic policies and performances, growth levels are varied. Examining the year-to-date picture, which includes the stronger early months followed by the April plunge and subsequent recovery, permits through August are virtually the same as last year, up just 0.4%. The split is fairly even, with 28 states issuing more housing permits than in 2019, and 22 states issuing fewer.
The map below illustrates the performance by state, with those in dark green registering gains. Alaska and Hawaii, not shown, are among those states issuing fewer permits.
The range in year-to-date permit changes is huge. It is led by the Dakotas, with South Dakota up a whopping 48% and North Dakota 35%. On the other end of the spectrum, Alaska is off by 28%, followed closely by Hawaii (-27%) and Michigan (-24%).
A cursory look at the map clearly shows regional patterns, with states in the West and much of the Northeast generating fewer permits than in the previous year.
The chart below compares changes in housing permits in two time frames: from this year to last, and from this year to the peak period from 2004 to 2006.
Each dot in the chart represents a state, not all of which are labeled. The horizontal line is drawn at the -50% level (see numbers on left) Those below the line remain at less than 50% of their peak permit years from 2004 to 2006, while those above it are performing closer to their peaks, although all states are below those highs.
The red dots in the lower left quadrant represent the worst-performing states, with housing permits both below last year and more than 50% below their peak levels. The upper right quadrant are the best-performing states, with gains vs. 2019 and less than 50% below their peak years.
Green dots highlight the top 10 states, which jointly represent 60% of the housing permits issued so far this year. They fall mostly in the upper-right quadrant.
For illustration purposes, the map below classifies the 50 states according to the number of housing permits issued so far this year. Darker colors indicate a greater number of permits.
In a state-by-state comparison, a modest correlation was found between issuance of housing permits and level of employment. As expected, states with a drop in permits were associated with larger declines in employment, with the opposite also holding true. Specifically, states that have issued fewer permits this year have seen an average 8% drop in employment, while those with more permits have averaged an employment decline of just 5%.
