radius logo
blog graphic

25 Mar 2024

Housing Permits Leading Indicator for Self Storage Demand


James McLean

Union Realtime

New homeowners = future self storage clients. With that in mind, one of the best leading indicators for the Self Storage Industry is issued Building Permits. Every municipality issues Building Permits on a local level, and collecting this data can be tedious; but, worth the effort. Deconstructing REIT expansion based on Building Permits, and rolling those figures into existing saturation rates, shows a clear pattern: REITS collect Building Permit Data.

How does the average investor take advantage of these figures? Simple: keep an eye on Macro Trends and collect Building Permit data for the localities that you are interested in developing or investing within.

For example currently, the sharp rebound in U.S. single-family homebuilding in February, reaching its highest level in nearly two years, reflects several factors at play in the housing market. Despite the challenge posed by higher mortgage rates, which can be a hurdle for many first-time buyers, builders are adopting various strategies to stimulate sales. Additionally, the housing market has found some support in the form of a housing shortage.

Homebuilding has been buoyed by this shortage, as well as by homeowners benefiting from lower mortgage rates. The recent data, indicating a decrease in housing units for sale compared to pre-pandemic levels, reflects this scarcity in the market.

These measures reflect the adaptability of builders in responding to market conditions and consumer preferences. By addressing affordability concerns and managing costs, builders aim to sustain the momentum in single-family homebuilding amid evolving economic and market dynamics.

The recent data on homebuilding activity does, however, provide a mixed picture across different regions and housing types. Single-family homebuilding saw significant jumps in the Midwest and South, while also increasing in the Northeast but declining in the West. Conversely, starts for housing projects with five units or more increased at a slower pace.

This year, the focus of homebuilding activity is expected to be predominantly on single-family housing, driven by a backlog of multi-family units under construction. The rebound in residential investment in the latter half of 2023, following nine consecutive quarters of contraction, is a positive sign after being a drag on gross domestic product for two years.

These trends suggest a continued resilience in the housing market, supported by strong demand for single-family homes and a gradual recovery in residential investment.

Next steps: collect Building Permit data, plug those numbers into your current Buy Box, explore a few Housing Hacks and pretty soon you will get a clear picture where demand will grow within the next couple of years. Need help collecting Building Permit data? Ask Us How!!

Other Articles