Building Permits Indicator: What It Is, Importance and Chart

Building Permits report reflects the change in the number of new building construction permitted by the US government. It is released by the Census Bureau in the third week of each month.

Notice that it is a permission and does not reflect the construction of new houses. There is another indicator known as “United States Housing Starts” reflecting the absolute number of new residential construction projects started in the specified month.

The Importance of Building Permits

The Building Permits is one of the leading economic indicators in the USA. It shows how optimistic or pessimist home buyers are. Since a home is the biggest purchase of most people, this indicator truly reflects investors’ confidence in the economy.

Home builders may not be the occupier. But, builders need trust in the economy to start construction. Mostly, they need to borrow. So, a good perspective is required to decide on building a building and pay interest to a bank.

Moreover, the building permit process can take from weeks to months. It is another good reason to believe that builders have thought carefully about their investments.

Almost every policy and business decision-maker tracks the Building Permits: Investors and traders track to gauge the strength of the USA. The Fed Council was used for the analysis of economic conditions. Authorities use this indicator to prepare housing programs. Banks use this data for mortgage loan terms. And so on.

An increase in the reading of issued permits reflects the economic sentiment improvement. So, a higher reading than expected may have a positive impact on the USD quotes and the stock market indexes.

How the Census Bureau Collects the Building Permits Data?

Building Permits reading reflects the total number of consents for the construction of new residential buildings issued by the authorities in the given month.

The US Census Bureau gathers data by sending requests to regulatory authorities each month. The sampling survey covers 9000 permit-issuing offices across the United States. Finally, using collected data, the Census Bureau develops the Building Permits indicator.

Historical Chart of Building Permits 

The following chart shows the last three years of Building Permits indicator value.

Final Words

Building Permits is a leading indicator because looking for construction requires time and confidence in the economy. There should be confidence for investors to start making houses. Moreover, Housing Starts, Existing Home Sales, and Pending Home Sales are other important indicators that should be considered.