Building Permits

Before any ground is broken on a new home or apartment building, a developer or homeowner must obtain a building permit from local government. Because this authorization step happens before construction starts, the building permits report is considered a leading indicator — it offers a glimpse of how many housing starts are likely to occur in the coming weeks and months. Economists read a sustained rise in permits as a sign that builders expect demand to hold up; a drop signals caution about the market ahead.

Like housing starts, permits data is published monthly and broken down by structure type — single-family versus multifamily. The figures are also reported as a seasonally adjusted annual rate (SAAR), extrapolating the monthly count into a full-year equivalent and smoothing out seasonal swings. Suppose permits spike in March as weather improves in northern regions — seasonal adjustment strips out that predictable pattern so the underlying trend is easier to read. You can track permit and starts releases on the economic calendar.

A common confusion is assuming that every permit issued will translate directly into a housing start. In practice, some permitted projects are delayed, scaled back, or cancelled — particularly if financing costs rise sharply or economic conditions deteriorate between the approval and the planned construction date. This is why economists treat permits as a directional signal rather than a precise forecast of future starts, and why they watch both indicators together rather than relying on either one alone.