Starts down, permits up - don't get too excited

The Census Bureau reported(.pdf) that housing starts declined but permits for new construction surged during the month of December in what continues to be a difficult period for the home building industry as new home construction remains near record lows.
Housing starts fell 4.0 percent after jumping 10.7 percent the month prior while the number of permits issued, a leading indicator for home building activity, jumped 10.9 percent in December after rising 6.9 percent in November.

Anyone interpreting the surge in permits as a sign of recovery should be reminded that this is very much a case of "one is greater than zero" since, for housing starts and permits, the entire year of 2009 was spent in record low territory for a data series that began in 1959.

For example, the current annual rate of 653,000 for permits issued, down 71 percent from the 2005 high, is still below the pre-2008 record low of 709,000 set back in March of 1975. When adjusted for the increase in population over the last 34 years (from about 215 million to 310 million), the current level of permits issued is almost 50 percent below the 1975 low.