Definition
Building permits measure new construction activity—more permits mean more building supply coming. Rising permits suggest future supply increases; falling permits suggest supply constraints. Permits are leading indicators of future market conditions.
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Building permits are required before construction can legally begin and are tracked by local governments and the U.S. Census Bureau. Permit data provides leading indicators of future housing supply and construction employment. Rising permit activity indicates growing housing supply in the pipeline, while declining permits suggest constrained future supply. Permit data lags actual construction by several months—permits are filed well before projects complete.
Pro Tip
Monitor building permit trends in your market. Increasing permits eventually increase housing supply and can moderate prices. Use permit trends to anticipate supply changes.
Example
A market issued 1,200 building permits during the quarter, up 25% from the prior year, indicating strong pipeline growth in future housing supply.