Tuesday, December 18, 2007

Single Family Housing Starts and Permits are Down Again in November

For those that think things are going to turn around in 2009, it appears that we still have a long way to go. In addition with a declining economy in 2008 and tight credit markets it appears that any type of recovery in 2008 or 2009 is difficult to forecast. Text in bold is my emphasis. From Market Watch:

New construction of single-family homes slowed to the weakest pace in 16 years in November as U.S. residential builders scrambled to reduce their inventories of unsold homes, the Commerce Department reported Tuesday.

Starts of single-family homes fell 5.4% to a seasonally adjusted annual rate of 829,000, the lowest figure since April 1991. Building permits for single-family homes fell 5.6% to 764,000, also the lowest in 16 years.

"Building permits and housing starts showed no signs of ending their free fall in November," wrote Lou Crandall, chief economist for Wrightson ICAP.

"We look for starts to continue to slide in the months ahead and for pricing to erode further," wrote Joshua Shapiro, chief economist for MFR Inc.

Including a 0.6% increase in construction on multifamily housing, total starts fell 3.7% to an annual rate of 1.19 million . . . . Starts have fallen in four of the past five months. Starts are down 24% in the past year, while starts of single-family homes are down 35%. Single-family starts are down 55% from the peak in early 2006.

Meanwhile, authorized building permits fell 1.5% in November to a seasonally adjusted annual rate of 1.15 million, the lowest rate in 14 years. Permits have fallen six months in a row.

Single-family permits are down 34% in the past year, the biggest year-over-year decline since early 1991.

Construction of multifamily units has held up much better than that of single-family homes, as builders shift their resources to building rental units. Starts of buildings with more than five units are up 22% in the past year.

Housing completions dropped 4.1% to a seasonally adjusted annual rate of 1.34 million. Completions are off 29% in the past year.

The government cautions that housing data are volatile and subject to large sampling and other statistical errors. In most months, the government can't be sure whether starts increased or decreased. In November, for instance, the standard error for starts was plus or minus 10.1%. Large revisions of reported figures are common.

It can take four months for a new trend in housing starts to emerge from the data. In the past four months, housing starts have averaged 1.24 million annualized, down from 1.28 million in the four months ending in October.

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