Builder Permit Drop: If this is bad, then what counts as GOOD?

Real estate articles in the Post often drive me batty. Take an article in today’s paper with this headline:

“Builders’ Permit Requests Tumble; Drop Seen as Bad Sign for Housing”

The article goes on to describe that permits for future construction dropped by the largest amount in 17 years, and that this is yet another indicator that the five-year boom ended last year. Really? Duh. Anyone who has looked around their neighborhoods at the For Sale signs in the last year can see that. What I think they missed in this article is that rather than this being a BAD sign for housing, this is actually a GOOD sign. Maybe even a GREAT one. It means that the builders recognize that the pace of building was unsustainable, and that inventory flooded the market. Permits is obviously a leading indicator of deliveries, so now we can expect a drop in deliveries later this year and into next. How can anyone argue that fewer houses being delivered is a BAD thing in this market? It means the market will be coming back into a more reasonable balance between available inventory and buyers. But, as we all know, bad news sells papers, so any available statistic gets spun as “bad news.” I’d be willing to bet that if permits went UP, then the headline would have been something like “Builder Permits Increase; Flood of Inventory Expected to Worsen Housing Market’s Woes”

Once again, I have to advise that if you’re looking to buy a home (not an investment property–that’s a whole other post), then you have to look at your individual situation, talk to a Realtor, and run the numbers yourself. Don’t let the press–which is certainly a LAGGING indicator–overly influence your decisions.