Real estate has been a driving force shaping economics in America for years. Many factors in the real estate market can predict or explain the ups and downs of the economy. More specifically building permits and housing starts “can be early indicators of activity in the housing market”. http://www.incontext.indiana.edu/2001/april01/details.asp
Building permits are a great way to indicate the fluctuations of the economy. This is due to the fact that building permits lead to new housing construction which in turn leads to new job availability and an increase in housing material production. “If more building permits are issued, this indicates more investment will likely be allocated to the housing market.” Additionally, an increase in commercial building permits could indicate businesses are expanding and an increase in building permits for warehouses could “be a sign that commerce will increase in the coming years.” All of these factors that deal with the amount of building permits issued could bring stability and wealth to the economy and GDP when they are increasing and thus are a great economic indicator. https://www.investopedia.com/terms/b/building-permits.asp
https://articles2.marketrealist.com/2015/02/understanding-building-permits-impact-homebuilders/
For example, as seen in this chart above, more building permits were issued from 1990 to 2005, when the economy was at its best. After 2005 we see a huge decline in the number of building permits which reflects how the economic conditions during that were not favorable.
Recently, new home construction fell in May 2019, however we can see from this data that building permits remain steady. JPMorgan Chase & Co.’s, Jesse Edgerton, quotes that this building permit data “suggests little cause for immediate concern.” However from this data we also see that building permits are not always inline with housing starts. This is due to the fact that housing starts can be influenced by many outside factors. Currently, rising construction costs are making it ” challenging to build homes at affordable price points relative to buyer incomes.”
https://www.cnbc.com/2019/07/17/us-housing-starts-june-2019.html