A Note About Residential Building Permits
The Economic Indicators table published each month in Wyoming Labor Force Trends includes data on Wyoming building permits. Each month the U.S. Census Bureau publishes estimates of the number of housing units authorized by building permits in the state and their valuation. The Bureau also publishes the number of permits issued for single-family homes and their valuation. These data are available for the U.S., states, metropolitan statistical areas (MSAs, such as Casper and Cheyenne), and certain counties and municipalities. Building permits are important because they are a leading indicator of employment in the construction sector (Bullard, 2004).
Unfortunately, simply glancing at the total units for a given month may not give an accurate picture of permit activity. According to the Census Bureau, a housing unit is “a house, an apartment, a group of rooms or a single room intended for occupancy as separate living quarters” (2008). In other words, the total units series includes both single-family homes and apartment units. So when an apartment complex with 100 apartments receives a building permit, the series will increase by 100 units that month and then decrease the following month. In a small state like Wyoming there can be significant month-to-month volatility within total units. Therefore, it is often more useful to track just the number of permits for single-family homes.
Figure 1 shows the number of building permits issued for single-family homes in Colorado, Idaho, and Utah for 2005 through 2008. In order to include data for 2008, we used the July year-to-date (YTD) figures for each year. The number of building permits issued in Colorado has decreased dramatically during the past few years. In the first seven months of 2005, permits were issued for 24,094 homes in Colorado. By 2008, the number of permits had fallen to less than one-third of their 2005 level. Building permits in Utah and Idaho fell to less than half of their 2005 levels.
In Montana and Nebraska, building permits fell to approximately 60% of their 2005 levels (see Figure 2). Unlike some of its neighboring states, Wyoming building permits decreased in 2006, and then increased in 2007. However, Wyoming permits fell in 2008 to approximately four-fifths of their 2005 level. Thus, while building permits have fallen in Wyoming this year, compared to most neighboring states the decline has been very modest.
Wyoming’s two metropolitan areas, Casper and Cheyenne, provide a different picture of building permits (see Figure 3). Cheyenne’s permits have declined to less than a third of their 2005 level, while Casper’s have actually increased.Quality Issues with Building Permit Data from the U.S. Census Bureau
Each month the Census Bureau publishes a monthly estimate (in this case, July 2008) and a new YTD estimate (July YTD). Rather than going back and revising earlier monthly estimates, the Bureau simply adjusts the YTD figures. So, for example, adding up the monthly permits for January, February, March, April, May, June, and July will yield a different result from the estimate presented as July YTD. For the statewide Wyoming single-family homes series, the sum of the monthly estimates is 1,269, while the July YTD estimate is 1,309, a difference of 40 homes (3.2%). Finally, the Census Bureau publishes annual estimates that often differ significantly from the December YTD estimates. The December 2007 YTD estimate for single-family homes in Wyoming was 2,743, while the final annual 2007 figure was 3,706, almost 1,000 homes higher.
A second data quality issue involves the valuation. Dividing the valuation by the number of homes gives an average value for each home. Using Wyoming data for July 2008, the average value of a home permitted in that month was $225,582. That sounds reasonable enough. However, according to the Census Bureau, in October 2006 there were 164 single-family home permits issued in Sheridan. The associated valuation of those permits was $1,785,689, or approximately $10,888 for each house. Thus while there may be much useful information in the Census Bureau’s building permit data, there are also significant unresolved problems with the data.References
Bullard, D. (2004, February). Forecasting employment in Wyoming’s construction industry. Wyoming Labor Force Trends, 41(2), Retrieved September 10, 2008, from http://doe.state.wy.us/LMI/0204/a2.htm
U.S. Census Bureau. (2008, May 19). New residential construction documentation. Retrieved September 11, 2008, from http://www.census.gov/const/www/newresconstdoc.html
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