Image: Home under construction in Pennsylvania
AP
This new home was under construction in Bridgeville, Pa. in May. It may have been the exception rather than the rule. Permits issued from January to June 2011 in the state fell 16 percent compared to the same six-month period one year earlier.
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updated 8/23/2011 8:30:09 AM ET 2011-08-23T12:30:09

There is a strong indication that home builders have almost ceased activity in several states as demand for newly built homes has dwindled. The slowdown in new home permits is particularly stark when compared to the total number of existing homes in each state. 24/7 Wall St. examined the number of building permits to find the states where no one wants to buy a new home.

Building permits are among the carefully watched statistics issues by the real estate industry each month. Permits are needed in most jurisdictions before individuals or contractor can begin physical work. Therefore, they are a reasonable indicator of future home construction. The data on permits are issued by the Commerce Department.

Building permit activity has fallen in most months since the 2007 housing crash — one that continues today. In the first half of 2005, slightly more than 1 million permits were issued. By contrast, the number was the just below 300,000 for the first six months of this year. The decline in new permits in some states is more than 80 percent for the same period.

Building permits are not enough in and of themselves to demonstrate a slowdown. Their size in relation to the total existing homes is also an indication of the state of the housing market. Consider that in a large state like California, across all towns and cities, just over 20,000 permits were issued during the first six months of this year. The number of permits may seem like a lot for a weak housing market, but is negligible when compared to the 13.6 million existing homes in the state.

24/7 Wall St. looked at the total number of building permits issued by each state for the first half of the year. We then identified the states that had the lowest percentage of new housing permits as compared to the total number of housing units.

List differs from worst housing markets
Surprisingly, our list of states where few permits have been issued recently is different from the typical list of the worst housing markets. California, Nevada and Florida are always on those lists because homes are vacant and home values continue to drop. But the three are not on this list. It may be that prices have dropped so low in these markets that home inventory has begun to move, even if only tentatively. Instead, markets where housing permits are very small in relation to total homes are markets in which builders have abandoned any hope of near-term sales.

The 24/7 Wall St. analysis is another look through the prism that is the collapsing residential real estate market. Most data the public sees are based on home prices, number of homes sold or foreclosures. Housing permits are a way to look ahead at what is likely to happen in the markets in the next year. Once a permit is issued, the builder has no obligation to begin or complete the construction. This additional risk has a compounding effect.

These are the states where no one wants to buy a new home.

10. Pennsylvania
Building permits/total housing units: 0.15 percent
Decline in building permits 2005-2011: -60.29 percent (11th smallest)
Building permits 2011 YTD: 8,136
Total housing units: 5,567,315

At the beginning of 2011, a number of new, restrictive building codes went into effect in Pennsylvania. This caused a rush among builders to secure permits, with housing permits increasing a massive 117.8 percent between November and December 2010, according to the Philadelphia Federal Reserve. The state’s housing market has not been doing well since. Permits issued from January to June 2011 fell 16 percent compared to the same six-month period one year earlier. The national average for permits issued in the first six months of 2011 compared to the first six months of 2011 is a decrease of 6 percent.

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9. Maine
Building permits/total housing units: 0.14 percent
Decline in building permits 2005-2011: -77.09 percent (11th largest)
Building permits 2011 YTD: 1,000
Total housing units: 721,830

Maine has seen one of the largest decreases in building permits in the past six years. This is unsurprising as home sales in general declined substantially. Home sales for June 2011 decreased 21.39 percent from June 2010, according to the Maine Association of Realtors. The state’s median sales price also decreased 1.37 percent over this same period. According to numbers from the Census Bureau, Maine has the highest vacancy rate in the country, reaching 22.8 percent in 2010. However, this number also includes empty vacation houses.

8. New York
Building permits/total housing units: 0.14 percent
Decline in building permits 2005-2011: -61.85 percent (12th smallest)
Building permits 2011 YTD: 11,033
Total housing units: 8,108,103

New York State’s housing market is among the largest in the country. As a result, the number of permits is minuscule when compared to the state’s total housing units. Although new home sales decreased in the first half of 2011 from 2010, the number of permits actually increased slightly during that period, from 10,189 in 2010. This is significantly lower than 2005’s 28,921 permits.

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7. Massachusetts
Building permits/total housing units: 0.12 percent
Decline in building permits 2005-2011: 69.55 percent (24th smallest)
Building permits 2011 YTD: 3,402
Total housing units: 2,808,254

Despite having a healthy economy compared to much of the country, Massachusetts’ housing market is beginning to face serious troubles. In June 2011, sales of single-family homes in the state decreased 23.5 percent from the year before, reaching the lowest level since 1991, according to the Warren Group, a New England real estate research firm. With so few home sales, it follows that not many new homes are being built. Year-to-date, building permits for 2011 are about one quarter of what they were in 2005.

6. Ohio
Building permits/total housing units: 0.12 percent
Decline in building permits 2005-2011: -76.61 percent (12th largest)
Building permits 2011 YTD: 6,184
Total housing units: 5,127,508

Ohio has suffered, and continues to suffer, greatly from the housing crisis. More than 8,000 homes were foreclosed in July 2011, the ninth-largest amount in the country, according to real estate company RealtyTrac. With such a high foreclosure rate, currently at one in every 608 housing units, housing is already too inexpensive for people to want to build. Ohio has therefore had one of the greatest decreases in building permits in the country over the past six years. Median existing home sales are also down in many areas of the state, according to data from the National Association of Realtors. In Toledo, prices are down 17 percent from one year ago, the third largest rate in the country.

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5. Connecticut
Building permits/total housing units: 0.09 percent
Decline in building permits 2005-2011: -74.06 percent (14th largest)
Building permits 2011 YTD: 1,403
Total housing units: 1,487,891

Connecticut has had one of the greatest declines in the number of new building permits in the country. This trend saw a small turnaround in June — the first monthly year-over-year gain in 2011 in new construction, according to the Connecticut Department of Economic and Community Development. However, the Hartford Courant reports that for “the first six months of the year, residential construction was down 30 percent compared with the same period in 2010.” June was also the first increase in home construction in five years.

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4. Michigan
Building permits/total housing units: 0.09
Decline in building permits 2005-2011: -82.19 percent (7th largest)
Building permits 2011 YTD: 4,250
Total housing units: 4,532,233

Michigan is one of the states that has suffered the most from the recession. The state’s unemployment rate peaked around 15 percent in 2010. It is now at 10.5 percent, which is still significantly higher than the national average of 9.2 percent. The state has a vacancy rate of just under 15 percent, which is one of the highest in the country. New building permits have also decreased by over 80 percent since 2005, also one of the highest rates in the country. The state may now be more focused on tearing down old buildings than building new ones.

3. Illinois
Building permits/total housing units: 0.09 percent
Decline in building permits 2005-2011: -84.18 percent (3rd largest)
Building permits 2011 YTD: 4,897
Total housing units: 5,296,715

Illinois has seen an almost 85 percent decrease in new housing permits since 2005. This is the third largest drop in the country. There are a number of initiatives being made across the state to improve the housing markets. In Chicago, for instance, Mayor Rahm Emanuel has made a number of changes to increase the speed with which building permits are issued. Additionally, a “micro-market recovery program” has been introduced to slow the city’s foreclosure rate.

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2. West Virginia
Building permits/total housing units: 0.09 percent
Decline in building permits 2005-2011: -72.71 percent (17th largest)
Building permits 2011 YTD: 774
Total housing units: 881,917

West Virginia’s decline in building permits has slowed to almost a crawl. In the first six months of 2005 the state issued almost 3,000 permits. For the first half of 2011, that amount decreased to 774. If every permit were to result in a new housing structure, those homes would represent less than 0.1 percent of the total housing units in the state. Despite all this, construction is one area that is benefiting the state. According to the organization WorkForce West Virginia, 700 construction jobs were added in-state this past July — the largest amount of jobs added in the private sector.

1. Rhode Island
Building permits/total housing units: 0.07 percent
Decline in building permits 2005-2011: -70.81 percent (22nd largest)
Building permits 2011 YTD: 312
Total housing units: 463,388

Foreclosure filings increased 4 percent in Rhode Island from the first six months of 2010 to the first six months of 2011, according to RealtyTrac. Foreclosures dropped by 29 percent for that same period on the national level. Rhode Island home sales decreased 20 percent from one year ago in the second-quarter, according to the Rhode Island Association of Realtors. Additionally, median home prices have dropped 2 percent. These numbers indicate that Rhode Island’s housing market is not recovering at the same pace as the majority of the country. For this first six months of this year, the state has issued a mere 312 building permits, the smallest number in the country.

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Copyright © 2012 24/7 Wall St. Republished with permission.

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